A project has to sell a machine that is obsolete. The market department finds a buyer who is willing to pay $100,000 for the machine. The machine was purchased 4 years ago for $1.1 million. The accounting department notes that the depreciation method for this machine is straight line, and the machine will be depreciated to zero over a five-year time period after purchase. What is the machine's after-tax salvage value? Tax rate is 21%.
Q: The security market line (SML) is an equation that shows the relationship between risk as measured…
A: Risk free rate rf: 4%Market return rm: 7%Market Risk premium RPm: 3%Beta: 1.2
Q: You would like to start saving for retirement. Assuming you are now 25 years old and you want to…
A: Future value of any amount or investment stream is its accumulated value which includes the…
Q: what would be the price of a bond with a call provision of one years' interest if the bond can be…
A: Bond life30Number of years since the issue is made10Number of years to maturity20Market interest…
Q: Within $10, what is the most that you can make?
A: If the stock price stays below $5, you will lose the premium you paid for the $5 strike call.If the…
Q: Given the following information, how many times does the firm turnover its inventory during the…
A: Inventory turnover ratio is computed as follows:-Inventory turnover ratio =
Q: The LIBOR zero curve is flat at 5% per year with continuously compounded out to 1.5 years. The swap…
A: Here,LIBOR for 1.5 years is 5%Swap Rate for 2 year semi annual pay swap is 5.4%
Q: Jarett & Sons's common stock currently trades at $22.00 a share. It is expected to pay an annual…
A: Calculate the cost of equity as follows:Cost of equity Therefore, the cost of equity is 10.82%.
Q: n investor bought a stock for $15 (at t=0) and one year later it paid a $1 dividend (at t=1). Just…
A: The rate of return decreases due to inflation and real rate of return is much less than nominal rate…
Q: You want to create a portfolio equally as risky as the market, and you have $1,000,000 to invest.…
A: Beta of portfolio is computed as follows:-Bp = ( Ba * Wa ) + (Bb * Wb) + (Bc * Wc) + (Br * Wr)where…
Q: Aphid Corp. will finance its next major expansion with 60% debt, 10% preferred stock, and 30%…
A: WACC means weighted average cost of capital.It is calculated as follows:-WACC =…
Q: A stock's returns have the following distribution: Demand for the Company's Products Probability of…
A: DemandProbability (P)RETURN (Y)(P * Y ) P * (Y -Average Return of Y)^2Weak10%-48-4.80490.00Below…
Q: What is the standard deviation for these results?
A: Net present value is determined by deducting the initial investment from the current value of cash…
Q: account that pays 10% interest compounded quarterly How much will Patti have in the account in Use…
A: In compounding there is interest on interest also including the principal amount of deposits done…
Q: How long do the following options have before they expire? Call Price = $5 Put Price = $9 Stock…
A: The put-call parity refers to the relationship that exists between the prices of the call and the…
Q: HotFoot Shoes would like to maintain its cash account at a minimum level of $33,000, but expects…
A: Given:Minimum level of $33,000 = LStandard deviation of daily cash flows to be $4800 = marketable…
Q: Bearcat Corporation is offering bonds to the market with a coupon of 15 percent. The bonds make…
A: The current worth of the bond can be found by using the PV function in the Excel sheet where the…
Q: AMC Corporation currently has an enterprise value of $390 million and $115 million in excess cash…
A: Buying of shares from the open market by the company in bulk, in order to reduce the external…
Q: Exercise 15-24 (Algo) Calculation of annual lease payments; residual value [LO15-2, 15-6] Each of…
A: Lease payments are regular, periodic payments made by a lessee to a lessor in exchange for the use…
Q: The financial statements for Warren Company show the following: Cost of goods sold $745,000…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: In each of the following cases, find the unknown variable: (Do not round intermediate calculations…
A: We need to use accounting break-even formula to calculate unknown variables.
Q: Jane wants to retire with $2,000,000 in her retirement account exactly 35 years from today. If she…
A: Compound = Monthly = 12Future Value = fv = $2,000,000Time = t = 35 * 12 = 420Interest Rate = r = 10…
Q: Marie wants to provide retirement income for her dependent parents for 35 years should she die.…
A: Insurance refers to a contract made between the insurance company and the insurer in respect of…
Q: For any given interest rate, ________compounding will yield the highest effective annual rate. a)…
A: Compounding refers to the process of earning interest (or returns) on an initial investment or the…
Q: You are trying to value the following investment opportunity: The investment will cost you $22,619…
A: NPV of projects is the difference in present value of cash flow and initial investment of projects…
Q: Your company currently has 7% coupon-rate bonds (coupons are paid semi-annually) with ten years to…
A: Compound = Semiannually = 2Assuming face Value = fv = $1000First BondCoupon Rate = c1 = 7 / 2 =…
Q: What is the dirty price of a 26-year bond with a 13.31 percent annual coupon, and a yield to…
A: Dirty price refers to the bond price which includes clean price and the accrued interest based on…
Q: Using a present value table (Table 6-4 and Table 6-5), calculate the present value for the…
A: Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: Calculate the MIRR of the project using all three methods with these interest rates. Note: Do not…
A: MIRR is the price in an investment plan that equalizes the most recent cash inflow with the most…
Q: 2. [Straddle]Suppose AAPL current price is $200. You purchase 10 calls with strike price equal to…
A: Straddle is option strategy in which there is buying of call and put of same strike price with same…
Q: For countries that have adopted the euro, they tend to have very similar Select one: O a. inflation…
A: In this question, we are required to determine the variable that remains similar for countries that…
Q: The value of a firm Multiple Choice equals the sum of the individual values of the firm's projects…
A: In this question, we are required to determine the correct statement regarding the value of a firm.
Q: . What will be the WACC for this project?
A: The weighted average cost of capital measures the typical cost a business pays to finance its…
Q: You're prepared to make monthly payments of $310, beginning at the end of this month, into an…
A: The objective of this question is to find out the number of payments required to reach a certain…
Q: 5. A Loan Amortization can help a Manager take advantage of lower interest rates. T/F 6. IRR can be…
A: True.Loan amortization refers to the process of paying off a loan over a specific period of time…
Q: Winnebagel Corp. currently sells 39,807 motor homes per yea at $66,583 each and 9,823 luxury motor…
A: Number of units of motor homes sold = 39,806Selling price of motor homes = $66,583Number of units of…
Q: ou have just signed for a car loan with 48 monthly payments of $500 (principal and interest) at an…
A: First we need to use loan amortization formula below to calculate loan amount.wherePV = loan…
Q: Alec, Daniel, William, and Stephen decide today to save for retirement. Each person wants to retire…
A: Future value refers to the estimated value of an asset or investment at a specified date in the…
Q: Dinklage International does not pay a common dividend. Dinklage’s growth rate for Cash Flow from…
A: The total worth of the firm can be found by adding the total worth of equity, preferred stocks, and…
Q: The effective interest rate to the nearest percent for the financing arrangement for the five annual…
A: The effective rate of interest, also known as the effective annual rate (EAR) or annual equivalent…
Q: Sunburn Sunscreen has a zero coupon bond issue outstanding with a face value of $11,000 that matures…
A: A popular mathematical method in finance for pricing European-style options is the Black-Scholes…
Q: If Megan has $35,000 in student loans and wants to pay them down using the standard repayment method…
A: Standard repayment method means paying loan amount in equal payments for 10 yearsPayment per period…
Q: Unequal Lives The Perez Company has the opportunity to invest in one of two mutually exclusive…
A: Project A:Cost of machine = 11 millionAfter-tax cash inflow = $5 millionAfter 4 years, the machine…
Q: Ghost Riders Co. has an EPS of $1.64 that is expected to grow at 8.4 percent per year. If the PE…
A: Expected EPS after 7 years= EPS today ( 1 + g ) ^7Price after 7 Years= EPS after 7 years * PE ratio
Q: Fun Land is considering adding a miniature golf course to its facility. The course would cost…
A: Net present value(NPV) is the difference between present value of all cash inflows and initial…
Q: Assume that the following quote for the Walt Disney Company, a NYSE stock, appeared on some…
A: Variables in the question:The Walt Disney Company (DIS) - NYSE136.55 +2.76 (+2.06%)Prev Close:133.79…
Q: oe just graduated from college and has found a nice job. As a graduation gift his father gave him…
A: Future value can be calculated usingFV (rate, nper, pmt, [Pv], [type])Rate The interest rateNper…
Q: Lai Xiaodong, a 22-year-old college-educated man, accepted a job at Foxconn Technology (where the…
A: Lai's hourly gross pay = Lai's daily pay / No of hours of work per dayLai's Weekly Gross pay =…
Q: explain how you got the calulation of dividend
A: Dividend for next year = dividend for current year * (1+growth rate)
Q: A fully amortizing mortgage is made for $112,000 at 6.5 percent interest. Required: If the monthly…
A: Mortagage amortization refers to the systematic repayment of loan and interest. Equal and regular…
Q: 11) A new robotic welder can be leased for 5 years with annual payments of he first payment…
A: Lease is kind of finance arrangement in which heavy equipments can used for payment for annual…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
- The following two statements concern depreciation: 1. Because our plant was shut down for part of the year, we will not depreciate it. Depreciating it for the full year would increase our costs and overstate the inventory. 2. I think we should have increasing depreciation expense each period because it will increase the funds recovered near the end of the assets life when maintenance costs are high and we will need to replace the asset. Also, I think tax rates will be higher toward the end of the assets life, so we will be better off to have a larger amount of depreciation expense then. Required: Prepare a short report that evaluates each of the following statements separately.Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.A project has to sell a machine that is obsolete. The market department finds a buyer who is willing to pay $100, 000 for the machine. The machine was purchased 4 years ago for $1.1 million. The accounting department notes that the depreciation method for this machine is straight line, and the machine will be depreciated to zero over a five - year time period after purchase. What is the machine's after - tax salvage value? Tax rate is 21%. Question 1 options: $1, 635.24 $2, 314.05 $142, 000.00 $2,784.62 - $289.26
- A machine was purchased 4 years ago for $50,000. The depreciation amount each year was $10,000. The firm that owns the machine no longer has a need for it, but a buyer is now willing to pay $60,000 for it because machines of this type are no longer available. If the tax rate is 23%, what tax will be owed on the transaction? EditA construction company is considering acquiring a new earthmover. The purchase price is $110,000, and an additional $25,000 is required to modify the equipment for special use by the company. The equipment falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $50,000. The purchase of the earthmover will have no effect on revenues, but the machine is expected to save the firm $68,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 25%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 10% payable annually. Determine the after-tax cash flows by using the generalized cash flow approach and the worth of the investment for this project if the firm's MARR known to be 12%. Click the icon to view the MACRS depreciation schedules. Click the icon to view the interest factors for discrete compounding when /= 10% per year. Click the icon to view the…A construction company is considering acquiring a new earthmover. The purchase price is $105,000, and an additional $28,000 is required to modify the equipment for special use by the company. The equipment falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $55,000. The purchase of the earthmover will have no effect on revenues, but the machine is expected to save the firm $70,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 6% payable annually. Determine the after-tax cash flows by using the generalized cash flow approach and the worth of the investment for this project if the firm's MARR is known to be 11%.
- Blossom Inc. wants to purchase a new machine for $25,900, excluding $1,200 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $1,700, and Blossom Inc. expects to sell it for that amount. The new machine will decrease operating costs by $6,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view PV table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, eg. 10.53.) Cash payback period years (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % (c) Assuming the company has a required rate of return of 10%, determine whether the new machine should be purchased. The…Startle Corporation wants to purchase a new production machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $65,000 (book value is $73,000). The new machine will cost $600,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $50,000 will be required if the new machine is purchased. The investment is expected to generate $75,000 in before tax cash net inflows during the first year of operation. The expected before tax cash net inflow for years two through five is $220,000 each year. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at…The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would…
- Sheridan Inc. wants to purchase a new machine for $44,300, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,200, and Sheridan Inc. expects to sell it for that amount. The new machine will decrease operating costs by $10,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period 4.36 years (b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % (c) Assuming the company has a required rate of return of 9%, determine whether the new machine should…Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.A new barcode reading device has an installed cost basis of $21,700 and an estimated service life of seven years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset a. What will the depreciation charge be in year seven? b What is the book value at the end of year six? c What is the gain (or loss) on the disposal of the device if it is sold for $3,000 after six years? a. The depreciation charge in year seven will be (Round to the nearest dollar.) b The book value at the end of year six is $ (Round to the nearest dollar.) c The on the disposal of the device if it is sold for $3,000 after six years is $1. (Round to the nearest dollar.) gain loss
