A large company is planning to purchase equipment costing $250,000 and will depreciate it fully using straight-line depreciation over 5 years. The company expects that the investmentwill have an annual benefit of $64,000. Each use of the equipment will also provide a benefit of $30. In 5 years, there will be no salvage value for the equipment. The company's combinedmarginal tax rate is 30%. Based on 18% after-tax MARR, how many uses of the equipment must the company have each year in order to justify its investment?Question 5 Part A: Choose the correct Before Tax Cash Flow Diagram for this scenario from the following choices.Option A01250,000Option C0250,0001G=30640005i=18%64000 +30X5i = 18%Option BG=30X64000015i = 18%250,000Option D0250,0005i=18%64000 +30X

In this scenario, the company is planning to purchase equipment costing $250,000 and will depreciate…

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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Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life 6 years federal 6.50% 21.0% Salvage value $30,000 tax rate BTCF-D TI tax rate BTCF-Income Tax Year Taxable BTCF MACRS Depreciation Income Income Tax ATCF 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 5 50,000 11.52% ($17,280) $32,720 $7,555 42,445 6 50,000 2.88% ($4,320) $45,680 $10,548 63,523 indudes 6 and disposal disposal 30,000 BV= $4,320 $25,680 $5,930 recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
Daily Enterprises is purchasing a $10.2 million machine. It will cost $51,000 to transport and install the machine. The machine has a depreciable life of 5 years and will have no salvage value. The machine will generate incremental revenues of $3.8 million per year along with incremental costs of $1.1 million per year. If Daily's marginal tax rate is 21%, what are the incremental earnings (net income) associated with the new machine? The annual incremental earnings are $ (Round to the nearest dollar.)
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A factory has decided to purchase some new equipment for P600, 000. The equipment will be kept for 10 years before being sold. The estimated salvage value for depreciation purposes is to be P45,000. Using straight line method, what is the book value at the end of its depreciable life? pls show manual solution a. P 50,000 b. P 25,000 c. 35,000 d. P 45,000
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You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a 3-year life, and has pretax operating costs of $73,000 per year. The Techron II costs $470,000, has a 5-year life, and has pretax operating costs of $46,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $50,000. If your tax rate is 24 percent and your discount rate is 10 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Techron I Techron II
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A relatively small privately owned coal-mining company has the sales results summarized below. Determine the annual percentage depletion for the coal mine. Assume the company’s taxable income is $150,000 each year. Year Sales, Tons Spot Sales Price, $/Ton 1 34,300 9.82 2 50,100 10 3 71,900 11.23 Year Gross Income, $ Depletion amount 50% of the taxable amount Allowed Depletion 1 2 3
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 investment will 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's combined 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 A 0 1 220,000 Option C 0 1 G=25 54000 i = 12% 8 i = 12% 54000 +25X Option B G=25X 54000 0 1 220,000 Option D 0 1 8 i = 12% 54000+25X i = 12%
John constructed a commercial building amounting to $1.59 Million. Permits and taxes charges amounted to 3.23% of the construction cost. It is expected to have a life of 50 years with a salvage value of 12.9% of the construction cost. Determine the depreciation charge during the 5th year using MACRS Method and the worth of the building after 22 years using Sinking Fund Method at money worth 8%. Show cash flow diagram and complete solution.
Consider the case of apiece of equipment costing $ 20000 and the scrap value $2000. the service life is estimated to be 5 years. Determine the asset value at the end of the first years , and the second years ? H. W at the end of 3d , 4th , 5th years. determine the depreciation cost
A new machine costs $899,090 and falls in a 29.50% CCA class. The machine will have zero value after 5 years of use but will save $417,680 annually in operating costs before taxes in those five years. Assume a tax rate of 34.17%. Using a required return of 15.11%, what is the equivalent annual cost (EAC) of the machine purchase, considering the annual cash flow, initial purchase, and CCA tax shield? Options $59,682 $61,252 $62,823 $64,393 $65,964

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