A truck costs $110,000 when new and has accumulated depreciation of $85,000. Suppose Green Valley Towing exchanges the truck for a new truck. The new truck has a market value of $92,000, and Green Valley pays cash of $58,000. Assume the exchange has commercial substance. Calculate the gain or loss on the exchange.
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- 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.In the System, if you sell an asset that belongs to a particular class that faces a depreciation recapture penalty, which of the following could never happen simultaneously A Capital Gains Tax B Purchase Price< Salvage Value C Salvage Value >UCC D Loss on disposal Determine the discounted payback period of a project that requires an investment of $7, 500 today, an investment of $3, 500 next year, and then generates cash flows of $9,000 in every subsequent year. Assume a discount rate of 12.0% A 2.54 years B 1.46 years C 1.22 years D 1.54 years E 1.61 yearsA heat exchanger is needed in a chemical process. If interest is 9% compounded annually, determine which of the following heat exchangers is cheaper by comparing the capitalized costs: Exchanger A costs P22,000 with a scrap value of P1,000 and a useful life of 7 years; Exchanger B costs P28,000 with a scrap value of P1,500 and a useful life of 10 years. Capitalized cost of Exchanger A: Php Capitalized cost of Exchanger B: Php Note: Input numerical values only, do not type the units, space or comma.
- Stuart Rentals can purchase a van that costs $105,000; it has an expected useful life of three years and no salvage value. Stuart uses straight-line depreciation. Expected revenue is $52,220 per year. Assume that depreciation is the only expense associated with this investment. Required a. Determine the payback period. (Round your answer to 1 decimal place.) b. Determine the unadjusted rate of return based on the average cost of the investment. (Round your answer to 1 decimal place. (i.e., .234 should be entered as 23.4).) a. Payback period years b. Unadjusted rate of return %Cordell Construction needs a piece of equipment that can be leased orpurchased. The equipment costs $100. One option is to borrow $100 from the local bankand use the money to buy the equipment. The other option is to lease the equipment. Thecompany’s balance sheet prior to the equipment purchase or lease is shown below:What would be the company’s debt ratio if it chose to purchase the equipment? Whatwould be the company’s debt ratio if it leased the equipment and it could keep the leaseoff its balance sheet? Is the company’s financial risk any different whether the equipmentis leased or purchased? Explain.Baird Rentals can purchase a van that costs $110,000; it has an expected useful life of five years and no salvage value. Baird uses straight-line depreciation. Expected revenue is $40,425 per year. Assume that depreciation is the only expense associated with this Investment. Required a. Determine the payback period. Note: Round your answer to 1 decimal place. b. Determine the unadjusted rate of return based on the average cost of the investment. Note: Round your answer to 1 decimal place. (l.e., .234 should be entered as 23.4). a. Payback period b. Unadjusted rate of return years %
- Omega Limited intends purchasing a new machine and has a choice between the following two machine: Machine ABC: The cost of this machine is R200 000 with an expected economic life of 5 years and a residual value of R20 000. Depreciation is calculated on the straight-line method. The expected new cash flows are as follows: Year 1 R68 000 Year 2 R54 000 Year 3 R64 000 Year 4 R60 000 Year 5 R52 000 Machine XYZ: The cost of machine XYZ is R220 000. It has an expected economic life of 5 years with no residual value. Depreciation is calculated on the straight-line method. The expected new cash flows are R66 000 per annum every year for the 5-year period. Omega Limited estimates that its cost of capital is 14%. Required: 2.1 Calculate the payback period for machine XYZ (answers must be expressed years, months and days) 2.2 Calculate the accounting rate of return for Machine ABC 2.3 Explain two advantages of using the accounting rate of return in capital…Crane Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for production system projects. Year System 1 System 2 0 -$15,300 -$43,700 1 15,300 31,700 2 15,300 31,700 3 15,300 31,700 Calculate NPV. (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round answers to 2 decimal places, e.g. 15.25.) NPV of System 1 is $ In which system should the firm invest? The firm should invest in System 1 90.22 and NPV of System 2 is $ 43.58Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $432,605, would have a useful life of 7 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $77,500 per year. The internal rate of return on the investment in the tractor-trailer is closest to (Ignore income taxes.): Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
- Carmel Corporation is considering the purchase of a machine costing $45,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? Multiple Choice $28,125. O $22,500. $45,000. $14,063. $11,250.A company has purchased a machine (CCA rate 24%) at $221,000 and has a tax rate of 38.00%. By how much will the NPV change if the company is able to obtain a $15,000 salvage value for its machine at the end of the project's life in Year 10? Assume a discount rate of 8.80% and that all else remains the same.Longmont Corporation is considering the purchase of a machine costing $44,000 with a 5-year useful life and no salvage value. Longmont uses straight- line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Longmont's average investment? Multiple Choice $26,400. $44,000. O $10,560. $8,800. $22,000.