6Because it fumes at room temperatures, hydrochloric acid creates a very corrosive work environment. A machine working in thatenvironment is deteriorating quickly and can be used for only one more year, at which time it will be scrapped with no salvage value. Itwas purchased 3 years ago for $88,000, and its operating cost for the next year is expected to be $49,000. A more corrosion-resistantchallenger will cost $206,000 with an operating cost of $46,000 per year. It is expected to have a $50,000 salvage value after its 10-year ESL. At an interest rate of 8% per year, what minimum replacement value would render the challenger attractive?The minimum replacement value that would render the challenger attractive is $ 5To understand the advantage of debt capital from a tax perspective in the United States, determine the before-tax and approximatedafter-tax weighted average costs of capital if a project is funded 60% -40% (D-E mix) with debt capital borrowed at 9% per year. Arecent study indicates that corporate equity funds earn 18% per year and that the effective tax rate is 37% for the year.The tax advantage reduces the WACC from% per year.Skipped% to

Answered: Image /qna-images/answer/6a9014c7-1c58-4662-9624-8b695c69a780.jpg

Answered: 6 Because it fumes at room…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The Everly Equipment Company’s flange-lipping machine was purchased 5 years ago for $55,000. It had an expected life of 10 years when it was bought, and its remaining depre-ciation is $5,500 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life. A new high-efficiency, digital-controlled flange-lipper can be purchased for $120,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $30,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $35,000. The firm’s tax rate is 25%, and the appropriate cost of…
The production manager on the Ofon Phase 2 offshore platform operated by Total S.A. must purchase specialized environmental equipment or an equivalent service. The first cost is $250,000 with an AOC of $66,000. The manager has let it be known that he does not care about the salvage value because he thinks it will make no difference in the decision-making process. His supervisor estimates the salvage might be as high as $100,000 or as low as $10,000 in 3 years, at which time the equipment will be unnecessary. Alternatively, a subcontractor can provide the service for $165,000 per year. The total offshore project MARR is 13% per year. Determine if the decision to buy the equipment is sensitive to the salvage value. The annual worth of high salvage value is $______________ 142,525 incorrect.. The annual worth of low salvage value is $_______________ 168,940 incorrect.. Decision is sensitive…
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $181, 500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $73, 500 per year. The new machine will be depreciated over its 5- year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52 %, 11.52 %, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. F1 Inflation Adjustments The Rodriguez Company is…
The manager of a plant that manufactures stepper drives knows that MACRS and DDB are both accelerated depreciation methods, but out of curiosity, he wants to determine which one offers faster write-off in the first three years for equipment that has a first cost of $400,000, a 5-year life, and a $50,000 salvage value. Determine which method yields the lower book value and by how much. DDB provides faster write-off for 3 years and difference is $28,800 DDB provides faster write-off for 3 years and difference is $12,600 MACRS provides faster write-off for 3 years and difference is $28,800 MACRS provides faster write-off for 3 years and difference is $12,600
A bhaliya
Because it fumes at room temperatures, hydrochloric acid creates a very corrosive work environment. A machine working in that environment is deteriorating quickly and can be used for only one more year, at which time it will be scrapped with no salvage value. It was purchased 3 years ago for $88,000, and its operating cost for the next year is expected to be $47,000. A more corrosion-resistant challenger will cost $236,000 with an operating cost of $48,000 per year. It is expected to have a $50,000 salvage value after its 10- year ESL. At an interest rate of 8% per year, what minimum replacement value would render the challenger attractive? The minimum replacement value that would render the challenger attractive is $ |
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its production equipment. Cari Heat (CH) is evaluating two options for its production equipment: upgrading or replacing. The company manufactures and sells 7,500 heaters every year, each priced at $920. The current production equipment, which was acquired at a cost of $2,150,000, has been in use for just two years and is subject to straight-line depreciation over a five-year useful life. Furthermore, it possesses no terminal disposal value, but it can be currently sold for $650,000. The following table presents data for the two alternatives: ABC 1 Choice Upgrade Replace 2 One-time equipment costs $3,500,0003 Variable manufacturing cost per Heater $180 $90 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment 0 0 Required 1. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade its production line or replace it?
t. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $29,000 to $78,500 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 25%, and the project cost of capital is 15%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
Georgia Ceramic Company has an automatic glaze sprayer that has been used for the past 10 years. The sprayer can be used for another 10 years and will have a zero salvage value at that time. The annual operating and maintenance costs for the sprayer amount to $15,000 per year. Due to an increase in business, a new sprayer must be purchased, either in addition to or as a replacement for the old sprayer.• Option 1: If the old sprayer is retained, a new, smaller capacity sprayer will be purchased at a cost of $48,000; this new sprayer will have a $5.000 salvage value in 10 years and annual operating and maintenance costs of $12,000. The old sprayer has a current market value of $6.000.• Option 2: If the old sprayer is sold, a new sprayer of larger capacity will be purchased for $84,000. This sprayer will have a $9,000 salvage value in 10 years and annual operating and maintenance costs of $24,000.Which option should be selected at MARR = 12%?

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