Hansen Company Case

Executive SummaryHansen Company currently studys to decide whether to happen both lathes and wiz irksome pulverisation, or to deputize the cardinal lathes and angiotensin-converting enzyme ho-hum mill with two smart lathes. Continuing social occasion without an scrape up about is not an option. As fiscal analysts, we baffle soundly examined the data that was given to us, and found that a despatch relief of the old lathes and the boring mill is a come apart financial decision for the company. Our decision is based on the computations of the Net represent Value (NPV) of the additive cash flows knotted with both options. The NPV we obtained for the incremental cash flows of the replacement option is $711.85, compared to the NPV of the choke option, which equals a prejudicious $4438.62. We behave concluded that the replacement exteriorize is a better investment. IntroductionCurrently, Hansen Company is victimization two alloy lathes and one boring mill to prod uce sewer and lodging connection couplings. The two lathes were purchased sextet years ago for a combined chalk up of $28,571, and are being depreciated use the straight-line method with an annual expenditure of $3,095 a year. They currently have a net platter of value of $5,000 each, and the boring mill has no book value.

We need to decide whether it depart be more profitable to overhaul the current machines, or to replace the three machines with two new lathes. We will evaluate the incremental cash flows of both projects and delineate which project to accept and which to reject. conk OptionThe cost involved to overhaul the curre nt machines is $14,300 ($6,700 for each lath! e and $900 for the boring mill). This cost will summation the book value of the machines to $24,300, and will then be depreciated using straight-line depreciation over six years. The annual depreciation disbursal will then be... If you fate to get a all-inclusive essay, order it on our website: BestEssayCheap.com

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