A new CNC machine is purchased for $40,000. The salvage value of the CNC machine is expected to be 15% of the initial cost. The CNC machine qualifies for 3-year GDS MACRS depreciation. What is the book value of the CNC machine after two years of depreciation
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A new CNC machine is purchased for $40,000. The salvage value of the CNC machine is expected to be 15% of the initial cost. The CNC machine qualifies for 3-year GDS MACRS
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- Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $32,000 (delivered). An additional $4,000 will be needed to install the device. The new device has an estimated 18-year service life. The estimated salvage value at the end of 18 years will be $2,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $15,000) has been in use for 9 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $2,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 10 percent. What is the NPV?Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 22% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is $ (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) 200% DB Year 1 2 3 4 Book values at end of year 4 SL 150% DB (...) 0 Cost Item Hardware Training Installation Cost $165,000 $15,000 $15,000Daily Enterprises is purchasing a $9.6 million machine. It will cost $46,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. If Daily uses straight-line depreciation, what are the depreciation expenses associated with this machine? The yearly depreciation expenses are $___________ (Round to the nearest dollar.)
- Ralph’s Bow Works (RBW) is planning to add a new line of bow ties that will require the acquisition of a new knitting and tying machine. The machine will cost $1.3 million. It is classified as a 7-year MACRS asset and will be depreciated as such. Interest costs associated with financing the equipment purchase are estimated to be $50,000 per year. The expected salvage value of the machine at the end of 10 years is $80,000. The decision to add the new line of bow ties will require additional net working capital of $55,000 immediately, $30,000 at the end of year 1, and $10,000 at the end of year 2. RBW expects to sell $370,000 worth of the bow ties during each of the 10 years of product life. RBW expects the sales of its other ties to decline by $23,000 (in year 1) as a result of adding this new line of ties. The lost sales level will remain constant at $23,000 over the 10-year life of the proposed project. The cost of producing and selling the ties is estimated to be $70,000 per year.…A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 annual income to be received at the end of each year. Annual depreciation expense is $590,000 per year. If a table of present values of $1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12% ? Multiple Choice $118.855 $583,676 $629,788 GA machine purchased three years ago for $318,000 has a current book value using straight-line depreciation of $192,000; its operating expenses are $39,000 per year. A replacement machine would cost $227,000, have a useful life of nine years, and would require $10,000 per year in operating expenses. It has an expected salvage value of $71,000 after nine years. The current disposal value of the old machine is $81,000; if it is kept 9 more years, its residual value would be $18,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Keep Old Machine Total costs Should the old machine be replaced? Purchase New Machine
- Pilot Plus Pens is deciding when to replace its old machine. The old machine's current salvage value is $3 million. Its current book value is $2 million. If not sold, the old machine will require maintenance costs of $500,000 at the end of the year for the next five years. Depreciation on the old machine is $400,000 per year. At the end of five years, the old machine will have a salvage value of $400,000 and a book value of $0. A replacement machine costs $4 million now and requires maintenance costs of $350,000 at the end of each year during itsfeconomic life of five years. At the end of the five years, the new machine will have a salvage value of $1,000,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $5,000,000. Pilot will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 28 percent and the appropriate discount rate is 10 percent. The company is assumed to earn sufficient…A company is thinking when to replace its old machine. It has two choices: replace the old machine now, or replace it at the end of seven years. Currently, the old machine has a salvage value of $3 million and book value of $1.5 million. If it is not sold, it will require maintenance costs of $770,000 at the end of the year over the nextsix years. The depreciation expense for the machine is $300,000 per year. At the end of six years, the machine will have a salvage value of only $100,000 and a book value of $0. If the company replaces the old machine now, the new machine will cost $4.9 million and will require maintenance costs of $320,000 at the end of each year during its six years economic life. At the end of six years, the new machine will have a salvage value of $900,000. It willbe fully depreciated using the straight-line method. If the company replaces the old machine in six years, a new machine will cost $3.5 million. The company will need to purchase this machine regardless of…Cisco Systems is purchasing a new bar code - scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 23% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (Round to the nearest dollar) (a) The cost basis of the device is $ (b) Annual depreciaitions and book values: (Round to the nearest dollar) Year 1 2 3 4 Book values at end of year 4 SL 69 69 69 69 69 150% DB 69 $ $ 200% DB 69 69 69 12 Cost Item Hardware Training Installation Cost $160,000 $16,000 $17,000
- Benson Enterprises is deciding when to replace its old machine. The machine’s current salvagevalue is $1.2 million. Its current book value is $1 million. If not sold, the old machine will requiremaintenance costs of $420,000 at the end of the year for the next five years. Depreciation on theold machine is $200,000 per year. At the end of five years, it will have a salvage value of $220,000.A replacement machine costs $3.5 million now and requires maintenance costs of $160,000 at theend of each year during its economic life of five years. At the end of five years, the new machinewill have a salvage value of $540,000. It will be fully depreciated using the three-year MACRSschedule. In five years a replacement machine will cost $4,000,000. Pilot will need to purchasethis machine regardless of what choice it makes today. The corporate tax is 35 percent and theappropriate discount rate is 10 percent. The company is assumed to earn sufficient revenues togenerate tax shields from…An investment of $20,000 for a new condenser is being considered. Estimated salvage value of the condenser is $5,000 at the end of an estimated life of 6 years. Annual income each year for the 6 years is $8,500. Annual operating expenses are $2,300. Assume money is worth 15% compounded annually. Determine the external rate of return and whether or not the condenser should be purchased.a. A new operating system for an existing machine is expected to cost $630,000 and have a useful life of six years. The system yields an incremental after-tax income of $195,000 each year after deducting its straight line depreciation. The predicted salvage value of the system is $26,200 b. A machine costs $540,000, has a $35,000 salvage value, is expected to last eight years, and will generate an after tax income of $82,000 per year after streight-line depreciation Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment (PV of 5), EV of S1, PVA of 31 and EVA of 50 (Use appropriate factor(s) from the tables provided) Complete this question by entering your answers in the tabs below. Required A Required A new operating system for an existing machine is expected to cost $630,000 and have a useful life of six years. The system vieles an incremental after-tax income of $195,000 each year after deducting its…