A company s considering the acquisition of a new machine that costs $429,000 and has a useful ife of 5 years with no salvage value The machine are gnore income taxes) Incremental Net Increnental Operating Income Net Cash Flows $ 70,000 $ 76,000 $ 87,000 $ 50,000 $ 92,000 $ 152,000 $ 155,000 $ 165,000 $ 152,000 $ 154,000 Year 1 Year 2 Year 3 Year 4 Year 5 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback penod of this anvestment is closest to (Round your answer to 1 decimal plece.) Multiple Choice 5.0 years 21 years 43 years 27 years O O OOm

A company s considering the acquisition of a new machine that costs $429,000 and has a useful ife of 5 years with no salvage value The machine are gnore income taxes) Incremental Net Increnental Operating Income Net Cash Flows $ 70,000 $ 76,000 $ 87,000 $ 50,000 $ 92,000 $ 152,000 $ 155,000 $ 165,000 $ 152,000 $ 154,000 Year 1 Year 2 Year 3 Year 4 Year 5 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback penod of this anvestment is closest to (Round your answer to 1 decimal plece.) Multiple Choice 5.0 years 21 years 43 years 27 years O O OOm

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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Original Machine Sinitial cost = 94210 SAnnual depreciation = 10876 SPurchased 5 years ago SBook Value = 40321 Salvage today = 44139 Salvage in 5 years = 7684 •New Machine Sinitial cost = 200000 $5-year life Salvage in 5 years = 0 SCost savings = 80000 per year 53-year MACRS depreciation •Required return = 15% •Tax rate = 38% Shall we go and buy the new machine? submit the solution on Excel
Project Year MACRS Depreciation Rate Year 0 Year 1 33.33% 44.45% Year 2 14.81% Year 3 7.41% A machine is purchased for $850,000 and is used through the end of Year 2. The machine will be depreciated using the 3-Year MACRS schedule in the table above. At the end of Year 2, the machine is sold for $75,000. What is the after-tax cash flow from the sale of the machine at the end of Year 2 if the firm's marginal tax rate is 35%? O $57,962 $70,795 O $79,608 O $55,998 O $62,985 O $75,000
ss
Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,000 and requires $5,300 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $24,800 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine. The initial cash flow will be $ (Round to the nearest dollar.)
Capital Investments Project DC Company is considering the purchase of a new machine. The price of the new machine is $122,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped. DC Co’s accountant, Erica, has accumulated the following data regarding annual sales and expenses with and without the new machine. Without the new machine, Erica can sell 10,000 units of product annually at a per unit selling price of $100. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same. The new machine is faster than the old machine, and it is…
Wizard Company has an old machine that is fully depreciated but has a current salvage value of $10,000. The company wants to purchase a new machine that would cost $60,000 and have a five-year useful life and zero salvage value. Expected changes in annual revenues and expenses if the new machine is purchased are: Increased revenues Increased expenses Salary of additional operator $56,000 Supplies 14,000 Depreciation Maintenance Increased net income 12,000 8,000 $120,000 90,000 $30,000 (Ignore income taxes in this problem.) Required: 1. What is the payback period on the new equipment? 2. What is the simple rate of return on the new equipment?
The management of Ortega Manufacturing has three different proposals under consideration. The Accounting Department has prepared the following information: Proposal B $ 2,450,000 Proposal C $ 2,055,000 Initial investment Useful life of equipment Estimated salvage value Payback period Net present value discounted at 15%* Which of the above proposals generates the greatest annual cash flow? Multiple Choice Proposal A Proposal B Proposal C Proposal A $ 3,100,000 Cannot be determined with the given information 7 Years $0 4.2 Years $ (30,000) 7 Years $ 400,000 4.4 Years $ 21,600 7 Years $ 100,000 4 Years $ 15,800
A company is considering two (2) capital expenditure proposals, X and Y. Both options will generate the new line of product that the company will produce. Both are expected to operate for four (4) years. Only one (1) proposal will be accepted. The following information is provided to you: Y Acquisition cost P46,000.00 P46,000.00 Life 4 4 Profits after depreciation Year 1 P6,500.00 P4,500.00 Year 2 3,500.00 2,500.00 Year 3 13,500.00 4,500.00 Year 4 -1,500.00 14,500.00 Scrap value 4,000.00 4,000.00 Depreciation is charged on a straight-line basis. Required: 1. Calculate the Payback Period for both proposals. Which proposal fared better? 2. Calculate the ARR for both proposals. Which proposal fared better? 3. Which appraisal method will you use to decide on this product? Explain.
None
P is present value S is salvage value
Subject: acounting
17 Acme is considering the sale of a machine with a book value of P160,000 and 3 years remaining in its useful life. Straight-line depreciation of P50,000 annually is available. The machine has a current market value of P200,000. What is the cash flow from selling the machine if the tax rate is 30%? Group of answer choices P200,000 P192,000 P190,000 P50,000 P184,000 P188,000 P172,000 P160,000

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