15. A company purchases a piece of equipment for$15,000. After nine years, the salvage value is $900.The annual insurance cost is 5% of the purchase price,the electricity cost is $600/yr, and the maintenance andreplacement parts cost is $120/yr. The effective annualinterest rate is 10%. Neglecting taxes, what is mostnearly the present worth of the equipment if it isexpected to save the company $4500 per year?(A) $2300(B) $2800(C) $3200(D) $3500

Present worth or the current worth of the investment can be find by using PVIFA and PVIF factor…

Answered: 15. A company purchases a piece of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 2P

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
16. A company purchases a piece of construction equipment. The expected income is SAR 3,100 annually for its useful life of 15 years. Expenses are estimated to be SAR 355 annually. If the purchase price is SAR 25,000 and there is no salvage value, what is the rate of return, neglecting taxes? (select the closest answer) a) 5.2% b) 6.4% c) 6.8% d) 7.0%
Auto Detailers is buying some new equipment at a cost of $188,900. This equipment will be depreciated on a straight-line basis to a zero book value its eight-year life. The equipment is expected to generate net income of $11,000 a year for the first four years and $24,000 a year for the last four years. What is the average accounting rate of return? A) 18.09 percent B) 15.48 percent C) 18.53 percent D) 17.76 percent E) 22.68 percent
Esc You consider purchasing a new piece of equipment (7yr MACRS property) for your manufacturing process for $120,000. The equipment has a 6-year useful life and no salvage value. The equipment is expected to generate an additional $40,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate= 35%. Annual inflation = 4%. a. Fill in the following table assuming MACRS depreciation rates Year 46°F Rain showers 0 1 F1 2 O 2 3 4 5 Pretax income 6 MACRS Taxable Depreciation income F2 - F3 + F4 Ⓡ b. If your MARR = 12%, should you purchase this system based on your real after-tax income? Why or why not? F5 8 C B Tax owed F6 Q Search G After tax income F7 Ca 7 F8 O Inflation adjustment factor O F9 ala LG F10 Real after tax income 0 A I THE F11 - 0 1 asod F12 + Prt Sc ScrLk Post-it sod Ins Post-it Del Backspace Post-it PgUp Home asod> Post-it Mumi 1-10 PgOn End Pause Break 11-15 11-15 C
D1. Account
What is the aftertax salvage value?
4. The Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $22,500, and it is expected to generate after-tax cash flows, of $6,250 per year. The truck has a 5- year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given here. The company's WACC is 10%. Year Annual After-Tax Cash Flow ($22,500) 6,250 6,250 6,250 6,250 6,250 0 1 2 3 5 After-Tax Abandonment Value $17,500 14,000 11,000 5,000 0 a. .Should the firm operate the truck until the end of its 5-year physical life; if not, what is the truck's optimal economic life? b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? Explain.
A company has purchased a machine at the cost of $35,000. The machine is expected to provide annual savings of $50,000 for two years and is to be depreciated by the MACRS three-year recovery period. This machine will require annual operating and maintenance costs in the amount of $15,000. The salvage value at the end of two years is expected to be $8,000. a) Assuming a marginal tax rate of 30% and MARR of 10%, what are the following for the Income Statement: Revenue,Expenses, Depreciation, Taxable Income, Taxes (30%), Net Income. What are the following for the Cash Flow Statement: Net Income, Depreciation, Capital Expenditure, Salvage Value, Gains Tax / Credit, Net After Tax Cash Flow. b) Assume MARR of 8%, calculate NPV of the project.
for this equipment. 0. Calculating Salvage Value Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-vear tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for S105,000. If the relevant tax rate is 22 percent, what is the aftertax cash flow from the sale of this asset? LO 2
hello Sir Please Need Answer of this General Accounting Question
mani.5
A machine costs $20,000. The machine can be disposed of after 2 years for $10,000. What is the ordinary gain using the following depreciation methods? 100% bonus depreciation. 5-year MACRS. 150% declining balance with N=5 years

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