An increasingly popular trend in mountain biking is to remove the chain and coast down the mountain. This has reduced demand for crank sets, chains, and derailleurs. As aresult, Endo Mountain Bikes Inc. is shutting down its bicycle propulsion plant. It purchased the plant 2 years ago for $310,000. It can sell the plant today for $169, 087.6. Theplant is in Class 43 with a depreciation rate of 30 %. When the plant is closed, Endo's net working capital will decrease by $50,000. EBITDA in the final year is $260,000.Endo's tax rate is 35%, and their cost of capital is 8%. What are the terminal year cash flows? Round your answer to the nearest dollar.

The term "terminal year cash flows" describes the cash flows anticipated to take place at the…

Answered: An increasingly popular trend in…

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

See similar textbooks

Similar questions

Wildhorse's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $59,950 price tag for a new truck would represent a major expenditure. Wildhorse Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Initial cost $59,950 Estimated useful life 8 years Net annual cash flows from towing $7,990 Overhaul costs (end of year 4) $5,970 Salvage value $12,000 Show Transcribed Text د Wildhorse's good friend, Rick Ryan, stopped by. He is trying to convince Wildhorse that the tow truck will have other benefits that Wildhorse hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Wildhorse tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Wildhorse the cost of plowing her parking lot. (Rick will give her a used plow blade for free if…
You have been retained to assist in the purchase of a taco truck.The owner did not keep very good accounts, but you hired an appraiser who determined:The truck itself is worth $7,500 and probably has about 3 more years of life in it. There is no salvage value to the truck.The kitchen equipment inside the truck is relatively new and worth $12,000 at present.This equipment is heavy-duty and should last another ten years before being scrapped, i.e. no salvage value.The owner has a long-term lease with 3 remaining years that you will assume. The lease has no independent value.The lease allows the truck to be parked and provides a small garage space in which you have a refrigeratorand you keep other items of inventory such as food preparation materials and paper goods.The refrigerator is worth $10,000 and has seven years of life. It will probably be worth $2,000 after seven years.The inventory consists of $4,500 worth of paper goods--napkins, plates, bags, as well as plastic utensils.The…
please try to answer it correctly. The other picture is an example of same question but diffrent numbers. Use it to have correct answer.
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $181, 500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $73, 500 per year. The new machine will be depreciated over its 5- year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52 %, 11.52 %, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. F1 Inflation Adjustments The Rodriguez Company is…
A heavy equipment rental company intends to replace a grader. It was purchased 5 years ago at a cost of $120,000. It was estimated to have a useful life of 10 years. It could be traded in now for $20,000. Due to frequent breakdown and repairs it was rented out for only 1,400 hours during the past year and the total repair cost was $6,000. A new grader is now available costing $200,000 and it is predicted to have an economic life of 10 years. It is expected to be rented at least 2,100 hours a year and maintenance cost will not exceed $3,500. All other out-of-pocket costs for the two machines would equal. If money is worth 15%, what must be the hourly rental rate for the new grader so that it could replace the old one?
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $600 for 5 years and $310 for the sixth year. Its current book value is $3,310, and it can be sold on an Internet auction site for $3,850 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life. Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $11,500, and has an estimated useful life of 6 years with an estimated salvage value of $1,600. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and allows for an output expansion, so sales would rise by $2,000 per year; the new machine's much greater efficiency would reduce operating expenses by $1,600 per year. To support the…
East Mill Pizzeria is closing its business. It sold its two-year-old pizza ovens to Marco's Italian Restaurant for $600,000. Originally, East Mill acquired the pizza ovens at a cost of $800,000. The ovens had an estimated useful life of 10 years, an estimated residual value of $50,000, and were depreciated using straight-line depreciation. Complete the requirements below for East Mill Pizzeria. 4. Record the sale of the ovens at the end of the second year (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the sale of ovens. Note: Enter debits before credits, Transaction General Journal Debit Credit Record entry Clear entry View general journal
Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its production equipment. Cari Heat (CH) is evaluating two options for its production equipment: upgrading or replacing. The company manufactures and sells 7,500 heaters every year, each priced at $920. The current production equipment, which was acquired at a cost of $2,150,000, has been in use for just two years and is subject to straight-line depreciation over a five-year useful life. Furthermore, it possesses no terminal disposal value, but it can be currently sold for $650,000. The following table presents data for the two alternatives: ABC 1 Choice Upgrade Replace 2 One-time equipment costs $3,500,0003 Variable manufacturing cost per Heater $180 $90 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment 0 0 Required 1. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade its production line or replace it?
The Dakuten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. 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. Dakuten is offered a replacement machine which has a cost of $8,000, an estimateduseful life of 6 years, and an estimated salvage value of $800. The company uses straight line method for calculating depreciation in financial accounts. The replacement machine would permit an output expansion, so sales would rise by $1,000 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 simultaneously…
Mr. Jones is considering replacing one of the machines in the factory and seeks your advice. The following information is relevant; Purchase Price Salvage Value Estimated Useful Life Variable Operating Costs Fixed Operating costs Old Machine 252,000 50,000 6 Years 52,000 40,000 New Machine 380,000 50,000 5 Years 15,000 6,000 The Old Machine was bought one year ago and has been depreciated using the straight line basis You are Required to report to Mr. Jones on: a) Whether there will be a gain or loss on the sale of the old machine. b) Whether the old machine should be replaced.
t. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $29,000 to $78,500 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 25%, and the project cost of capital is 15%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
Supreme Auto Service opened a new service center three decades ago. At the time the center was preparing to open, new equipment was purchased totaling $355,000. Residual value of the equipment was estimated to be $45,000 after 20 years. The company accountant has been using straight-line depreciation on the equipment. (a) How much was the annual depreciation for the original equipment (in $)? $ (b) If the hydraulic lift had originally cost $10,650, what would its residual value (in $) be after 20 years? $ (c) After six years of operation, the original hydraulic lift was replaced with a new model that cost $23,000. Book value was allowed for the old machine as a trade-in. What was the old hydraulic lift's book value when the replacement machine was bought (in $)? $ (d) What was the book value of the equipment inventory at the six-year point, substituting the new hydraulic lift for the original after the new lift had joined the inventory (in $)? Enter a number

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS