A project to replace an old machine with a new one is under consideration. The new machine costs $12.000 and requiresan additional working capital investment of $750. The old machine is expected to have a $750 salvage value. Calculatethe Initial Outlay of this replacement project assuming the book value of the old asset is $1500. The firm's marginal taxrate is 50%.O None of the listed choices is correctO $11.287.50O $12.037.50O $12.112.50O $11,625.00

Salvage value net of tax is that amount which is received by the investor from selling the assets at…

Answered: A project to replace an old machine…

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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A firm is considering purchasing equipment that will reduce annual costs by P 40,000. The equipment costs P 300,000 and has a salvage value of P 50,000 and a life of 7 yrs. The annual maintenance cost is P 6,000. While not in use by the firm, the equipment can be rented to others to generate an income of P 10,000 per year. If money can be invested for an 8% return, is the firm justified in buying the equipment? Use annual cost method.
don't answer by pen pepar
what is the present value of the tax shield for the following project? the initial investment is $300,000. the project will last for 6 years, at which time the asset will be sold for $90,000. the asset will be depreciated on a declining balance basis at a rate of 20 percent. the firm's marginal tax rate is 40 percent. the firm's required rate of return is 8 percent a) 16,204.36 b) 82,539.68 c) 98,744.04 d) 66,335.32
Nikul
Firm X is considering the replacement of an old machine with one that has a purchase price of $100,000. The current market value of the old machine is $23,000 but the book value is $38,000. The firm's combined tax rate is 30%. What is the net cash outflow for the new machine after considering the sale of the old machine? Disregard the effect of depreciation of the new machine if acquired. Multiple Choice $72,500 $78, 370 $84, 850 $69, 100
Your firm is considering investing in a new capital project that requires an initial investment of $8,000,000. This equipment will be depreciated by the straight-line over four years down to a value of zero. The machinery also has an operation life of four years. At the end of that life, you estimate it will have a salvage value of $120,000. Any gain or loss on the resell will be taxed at the firm's marginal tax rate. During the four-year life, the project should generate annual cash flows of $225,000 per year. The firm has a marginal tax rate of 22%, and it requires a return of 8.50% on projects of such risk. What is the Net Present Value of this project?
Fox Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Unit sales Sales price Variable cost per unit Fixed operating costs This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. Fox pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. O $20,571.03 O $27,428.04 O $26,285.20 O $22,856.70 Which of the following most closely approximates what the project's net present value (NPV) would be under the new tax law?(Hint: Round your final answer to two decimal places and choose the value that most closely matches your answer.) Year 1 Year 2 Year 3 3,000 3,250 3,300 $17.25…
Please help me
1. what amount should be used as the initial cash flow for this project and why?? 2. What is the after-tax salvage value for the spectrometer? 3. What is the MPV of the project? Should the firm accept or reject this project?
None
Firm X is considering the replacement of an old machine with one that has a purchase price of $70,000. The current market value of the old machine is $22,000 but the book value is $ 37,000. The firm's combined tax rate is 27%. What is the net cash outflow for the new machine after considering the sale of the old machine? Disregard the effect of depreciation of the new machine if acquired.
Gibson Mfg., Inc. is considering the introduction of a new product. Company management has prepared the following estimates related to the project as well as the related range of values, where applicable. The project under consideration has a five-year life and initial costs of $15,000. Assume the tax rate is 34 percent, there is no salvage value, and the project requires a 12 percent rate of return. sales quantity 2000 +_7percent sales price $14+_10 percent variable cost per unit $10+_2percent fixed costs $8+_1percent depreciation $3000 What is the contribution margin under the pessimistic scenario? a)$2.4 b)$3.8 c)$4.0 d)$5.6

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