Adco industries makes heavy machinery and they have a specialized soldering machine. This machine requires annual maintenance, for which they pay $5000 a year. The original cost of the machine was $150,000. It is expected that the soldering machine will last 16 years, and will have a salvage value of $11,000. Adco pays taxes at a rate of 40% and expects an after-tax return of 8% on investments. What is the after tax annul cost if the soldering machine? The CCA rate for this type of equipment is 20 percent. (Hint: Find CTF and CSF, then the annual worth).

Adco industries makes heavy machinery and they have a specialized soldering machine. This machine requires annual maintenance, for which they pay $5000 a year. The original cost of the machine was $150,000. It is expected that the soldering machine will last 16 years, and will have a salvage value of $11,000. Adco pays taxes at a rate of 40% and expects an after-tax return of 8% on investments. What is the after tax annul cost if the soldering machine? The CCA rate for this type of equipment is 20 percent. (Hint: Find CTF and CSF, then the annual worth).

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

Item A is currently in use at a plant. The original cost of the piece of machinery was $2,000. Its maintenance cost is $500 this year, increasing each year by $30. Items A can be replaced by Item B which has a current cost of $3,500. Item B has no annual maintenance costs, but it is anticipated that the item purchase cost increases by $50 per year. Disregarding income taxes effects (such as depreciation), what is the predicted optimum time (after year 'X') to schedule a replacement of Item A with Item B. Use 8% as the 'interest rate', which really is the value of money to the company. a. 5 years b. 6 years c. 7 years d. 8 years
D 0 P 2,020 0 2,000 0 8 700 1,560 7,413 1 2 8.840 1 P22,533 e with the = should be cost of only ROR on additional investment on D Solution Untreated Pole Annual costs: Depreciation - Machine D is economical than Machine B, choose Machine D. teample y (7-4) An untreated electric wooden pole that will last 10 years under certain soil condition costs P1,200. If a treated pole will last for 20 years, what is the maximum justifiable amount that can be paid for the treated pole, if the maximum return on investment is 12%? Consider annual taxes and insurance amount to be 1% of first cost. (ME Board Problem - Oct. 1988) P1,200 F/A, 12%, 10 -P13,695)(100) P52,000-P30,000 = 18.47> 17% P1,200 17.5487 -= P 68.38
Urgently need. You are considering purchasing a dump truck. The truck will cost $75,000 and have operating and maintenance costs that start at $18,000 the first year and increases by $2,000 per year. Assume that the salvage value at the end of five years is $22,000 and interest rate is 15%. What is the capital recovery cost with return at 15% over the 5 years?
A reactor of special design un the major item of equipment in a small chemical plant The initial cost of a Completely installed reactor is $ 60000 to the salvage value of the end of the useful life is estimated to be $ 10000. The total annual expenses for the plant are $100000. Excluding depreciation costs for the reactor. How many years of useful life should de estimated for the reactor if 12% of the total annual expenses for the Plant are due to the cost for reactor depreciation?
A man invests in a project that requires a fixed capital of P 2.5M with no salvage, and life of 12 years. During its life an estimated maintenance cost of P280, 000 will be spent each year. Taxes and insurance will be 5% of the first cost. The project will yield a uniform annual revenue of P 1M. The company expects to earn 20% before income taxes. Compute the pay out period.
5 A chemical plant is considering installing a new water purification system that costs $X. The expected life is A years and the salvage value is computed using the declining-balance method with a depreciation rate of B%. The operating costs are estimated at $Y per hour of operation. The expected savings are $Z per operating hour. MARR = X= Y= Z= A= B= C= 10% $15,300 $5 per hour $15 per hour 5 years 10% 1500 hours What is the salvage value at the end of A years? Try Again What is the annual worth of the new system if the current operating hours are C per year on average? Try Again What is the break-even level of operating hours? Try Again
Give typing answer with explanation and conclusion
5
Kolby's Korndogs is looking at a new sausage system with an installed cost of $670,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $88,000 at the end of the project's 5-year life. The sausage system will save the firm $213,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $41,000. If the tax rate is 23 percent and the discount rate is 11 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Mustang Auto Parts, Inc. is considering one oftwo forklift trucks for its assembly plant.• Truck A costs $15,000 and requires $3,000 annually in operating expenses. It will have a $5,000salvage value at the end of its three-year servicelife.• Truck B costs $20,000, but requires only $2,000annually in operating expenses; its service life isfour years, at which time its expected salvage valuewill be $8,000.The firm’s MARR is 12%. Assuming that the trucksare needed for 12 years and that no significantchanges are expected in the future price and functional capacity of each truck, select the most economical truck on the basis of AE analysis.
A company is looking at purchasing a new Zeiss CMM (precision measurement machine). They believe having this machine will allow them to get a new contract. The machine would cost $525,000. It would allow the manufacturer to produce 250 custom engine block heads per day (350 days per year) at a gross profit of $1.95 each, but the company would have to pay tax of 25% on their profit. Assuming you looked at everything on a yearly basis and that the project would go on for 5 years, what is the rate of return (%) on this project? (round to the nearest tenth of a percent) 3.5% 9.5% 7.0% 7.5%
6.3