A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. Il purchased, the machine would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (.o., 20.0 %, 32.0%, 19.2 %, 11.5%, 11.5%, and 5.8%). Adoption of the project would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for $30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero. The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50,000. It is estimated that the machine can be sold as scrap at the end o its 5 year useful life for $80,000. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40% What is cash flow from the project for year 19 $45,000 $75,000 $125,000 $170,000 Note: The following data will be used for 5 questions: A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. If purchased, the machine would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (.e., 20.0%, 32.0%, 19.2%, 11.5%, 11.5%, and 5.8%). Adoption of the project would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for $30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero. The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50,000. It is estimated that the machine can be sold as scrap at the end of its 5 year useful Me for $80.00u. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40% What is the tax liability created by the sale of the new machine at the end of its useful the (e, at time 6)? $17.500 $20,400 $32,000 143,750
A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. Il purchased, the machine would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (.o., 20.0 %, 32.0%, 19.2 %, 11.5%, 11.5%, and 5.8%). Adoption of the project would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for $30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero. The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50,000. It is estimated that the machine can be sold as scrap at the end o its 5 year useful life for $80,000. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40% What is cash flow from the project for year 19 $45,000 $75,000 $125,000 $170,000 Note: The following data will be used for 5 questions: A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. If purchased, the machine would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (.e., 20.0%, 32.0%, 19.2%, 11.5%, 11.5%, and 5.8%). Adoption of the project would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for $30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero. The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50,000. It is estimated that the machine can be sold as scrap at the end of its 5 year useful Me for $80.00u. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40% What is the tax liability created by the sale of the new machine at the end of its useful the (e, at time 6)? $17.500 $20,400 $32,000 143,750
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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Question
Transcribed Image Text:A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. If purchased, the machine
would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (e, 20.0%, 32.0%, 19.2 %, 11.5%, 11.5%, and 5.8%). Adoption of the project
would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for
$30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero.
The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50,000. It is estimated that the machine can be sold as scrap at the end of
its 5 year useful life for $80,000. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40%.
What is cash flow from the project for year 17
$45,000
$75,000
$125,000
$170,000
Note: The following data will be used for 5 questions:
A firm is considering investing in a new piece of equipment. The equipment would cost $500,000 and would have shipping and installation cost of $125,000. If purchased, the machine
would have an estimated useful life of 5 years and would be depreciated via a 5-year MACRS schedule (.e., 20.0%, 32.0%, 19.2%, 11.5%, 11.5%, and 5.8%). Adoption of the project
would also require an increase in working capital of $50,000. If the new equipment is purchased, an old piece of equipment (which is still useable for 5 more years) could be sold for
$30,000. The old machine had been depreciated on a straight line basis and currently has a book value of zero.
The machine would generate annual incremental revenues of $250,000 and annual incremental expenses of $50.000. It is estimated that the machine can be sold as scrap at the end of
its 5 year useful Me for $80,000. The required return on projects of this nature is 14% and the firm's marginal tax rate is 40%
What is the tax liability created by the sale of the new machine at the end of its useful ife (e, at time 6)?
$17.500
$20,400
$32,000
$43,750
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