A large company is planning to purchase equipment costing $220,000 and will depreciate it fully using straight-line depreciation over 8 years. The company expects that the investmentwill have an annual benefit of $54,000. Each use of the equipment will also provide a benefit of $25. In 5 years, there will be no salvage value for the equipment. The company'scombined marginal tax rate is 24%. Based on 12% after-tax MARR, how many uses of the equipment must the company have each year in order to justify its investment?Question 8 Part A: Choose the correct Before Tax Cash Flow Diagram for this scenario from the following choices.Option A01220,000Option C01G=2554000i = 12%8i = 12%54000 +25XOption BG=25X5400001220,000Option D018i = 12%54000+25Xi = 12%

Step 1: 8A. choose the correct before tax cash flow diagram for this scenario from the following…

Answered: A large company is planning to purchase…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Printing World thinks it may need a new colour printing press. The press will cost $540,000 but will substantially reduce annual operating costs by $216,000 a year, before tax. The press has a 30% CCA rate and will be in its own asset pool. The first CCA deduction is made in year 0. The press will operate for 4 years and then be worthless. The cost of equity for Printing World is 10%, the cost of debt is 9%, and the company’s target debt-equity ratio is 0.50. The company’s tax rate is 30%. a. What is the NPV of buying the press?.
A8 A machine has an initial cost of P50,000 and a salvage value of P10,000 after 10 years. What is the book value after five years using straight-line depreciation?
A front-end loader costs $70,000 and has a depreciable salvage value of $10,000 at the end of its 5-year useful life. Use MACRS depreciation to compute the depreciation schedule and book value of the equipment.
Assuming 25% tax rate, 20% CCA rate and 10% discount rate, recommend the better of the following equipment, with support. Initial Cost Useful Life Salvage Value Annual Maintenance A $110,000 8 years $10,000 $1,100 B $150,000 12 years $25,000 $1,500
3 A business needs to purchase packaging equipment that will provide revenue of $120,000 per year for 10 years; operating costs are $40,000 per year for 10 years. The equipment costs $220,000, has an estimated useful life of 10 years, and has a salvage value of $20,000 at the end of that period. It is depreciated using the sum-of-the-years-digits method. The company pays income tax at a rate of 30%, VAT of 16% and MARR of 10%. To acquire the equipment, a loan of $70,000 is requested at a rate of 12.5% annual interest, which must be repaid in six years through equal fixed payments (Rents) each year-end, the first one a year after the purchase. Determine the NPV, IRR, EAC, COST/BENNEFIT. *Please show procedure in Excel*
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1. GridCo Analytics needs to purchase new land surveying equipment. GridCo's after tax MARR is 9% and the corporate tax rate is 42%. Surveying equipment is a CCA Class 8 asset. The remaining data are contained in the table below. Model First Cost Economic Life Annual Net Salvage Value (Years) $20,000 $25,000 $30,000 (a) Using the annual worth method, which model should BlastCo buy? ' $110,000 $130,000 $155,000 Savings | $65,000 $85,000 $90,000 Ranger 5 Sonic_Flex 5 Laser_Metric 5 (b) What is the approximate after tax IRR of each model? ( (c) What is the exact after tax IRR of each model? tcas
QUESTION 1 A new machine is to be purchased for $200,000. The company believes it will generate $75,000 annually in revenue due to the purchase of this machine. The company will have to train an operator to run this machine and this will result in additional labor expenses of $25,000 annually. The new machine will be depreciated using 5 years MACRS, even though the life of the project is 7 years, and the salvage value is estimated to be $0 at the end of year 7. The tax rate is 40% and the company's MARR is 15%.
The Shell Corp. owns a piece of petroleum drilling equipment that costs $200,000 and will be depreciated by DDB depreciation with B=$200,000, N=10 years, S=$0. There is a combined 50% tax rate. Shell will lease the equipment to others each year and receive $80,000 per year. At the end of 3years, the firm will sell the equipment for $100,000. If the firm requires a 10% after-tax rate of return, what is the PW of the investment?
The depreciation schedule for certain equipment has been arrived at by various methods. The estimated salvage value of the equipment at the end of its 7 year useful life is $700. Identify the resulting depreciation schedules. Year I II III IV 1 $1,329 $2,325 $2,857 $3,161 2 $1,329 $1,993 $2,041 $2,162 3 $1,329 $1,661 $1,458 $1,478 4 $1,329 $1,329 $1,041 $1,011 5 $1,329 $ 996 $ 744 $ 692 6 $1,329 $ 664 $ 531 $ 473 7 $1,329 $ 332 S 379 $ 323 Which scheme represents DB depreciation? Select one: II III IV I

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