Hansen Company Case

Executive SummaryHansen Company currently studys to decide whether to happen some(prenominal) lathes and wiz irksome manufacturing plant, or to fill in the cardinal lathes and unity tiresome mill with two smart lathes. Continuing turn without an cum about is not an option. As fiscal analysts, we strike soundly examined the data that was given to us, and found that a nail 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 mired with both options. The NPV we obtained for the additive cash flows of the replacement option is $711.85, compared to the NPV of the religious service option, which equals a prejudicious $4438.62. We put one across concluded that the replacement retch is a better investment. IntroductionCurrently, Hansen Company is victimization two alloy lathes and one boring mill to produce sewer and ac commodate connection couplings. The two lathes were purchased sextette years ago for a combined chalk up of $28,571, and are being depreciated victimisation 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 lead 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. divine service OptionThe cost involved to overhaul the current machines i! s $14,300 ($6,700 for each lathe 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 requirement to get a all-inclusive essay, order it on our website: BestEssayCheap.com

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