Andres Gimenez is considering purchasing the DoublePlay 3000 machine. The machine will costAhmed $100,000 and he estimates it will last two years after which he will sell the machine for$30,000.The machine is considered specialty equipment under MACRS depreciation and depreciatedover 4 years as shown below.The tax rate is 40%.RevenueFixed CostsSG&A expensesDepreciationIEBITTaxesYear 1 Year 2$125,000 $ 125,000$ 40,000 $ 40,00020,00020,00033,33344,450$ 31,667 $ 20,5508,22012,667Net Income$19,000 $ 12,3301. What is the net present value of the investment, assuming an interest rate of 10%?2. What is the internal rate of return of the investment?

Andres Gimenez is considering purchasing the DoublePlay 3000 machine. The machine will cost Ahmed $100,000 and he estimates it will last two years after which he will sell the machine for $30,000. The machine is considered specialty equipment under MACRS depreciation and depreciated over 4 years as shown below. The tax rate is 40%. I EBIT Taxes Year 1 $125,000 Year 2 $125,000 Revenue Fixed Costs $ 40,000 $40,000 SG&A expenses 20,000 Depreciation 33,333 20,000 44,450 $ 31,667 $ 20,550 12,667 8,220 Net Income $19,000 $12,330 1. What is the net present value of the investment, assuming an interest rate of 10% ? 2. What is the internal rate of return of the investment?

Andres Gimenez is considering purchasing the DoublePlay 3000 machine. The machine will cost Ahmed $100,000 and he estimates it will last two years after which he will sell the machine for $30,000. The machine is considered specialty equipment under MACRS depreciation and depreciated over 4 years as shown below. The tax rate is 40%. I EBIT Taxes Year 1 $125,000 Year 2 $125,000 Revenue Fixed Costs $ 40,000 $40,000 SG&A expenses 20,000 Depreciation 33,333 20,000 44,450 $ 31,667 $ 20,550 12,667 8,220 Net Income $19,000 $12,330 1. What is the net present value of the investment, assuming an interest rate of 10% ? 2. What is the internal rate of return of the investment?

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 new machine can be purchased for $1,500,000. It will cost $45,000 to ship and $55,000 to install the machine. The new machine will replace an older machine that is fully depreciated and will be sold for $125,000. The firm’s income tax rate is 40%. What is the initial outlay (IO) for the new machine? $1,525,000 $1,600,000 $1,675,000 $1,725,000
Talia’s Tutus bought a new sewing machine for $90,000 that will be depreciated over 5 years using double-declining-balance depreciation with a switch to straight-line. a. Find the depreciation charge each year. b. If the sewing machine is sold after 2 years for $55,000, what will be the after-tax proceeds on the sale if the firm’s tax bracket is 35%?
Martin D. Martian Inc. is considering the purchase of a new argyle sock knitting machine to replace a less automated one. The new machine will cost $250,000 plus $30,000 for shipping and $16,000 installation. The machine being replaced was purchased five years ago for $180,000 and depreciated as a 7-year MACRS property. It can be sold for $64,000. Martin has a marginal tax rate of 40%. Compute the NINV for the project. Use the rounded MACRS schedule listed below: (7-Year Depreciation Schedule: 14%, 25%, 18%, 12%, 9%, 9%, 9%, 4%)
Speed Queen Laundromat faces a 40% tax rate and uses a 12.7% discount rate. Speed Queen is purchasing a new $49,800 touchscreen laundry system that will raise annual sales by $5,800 and lower annual operating costs by $14,300. This system, which will have no salvage value, is expected to have a 7-year life and will be depreciated (straight-line) to zero. What is the NPV of purchasing the new laundry system? a. −$14,329 b. $5,148 c. $16,742 d. $23,094 e. −$1,204
Suppose that a company is considering a machine acquisition. The new machine will cost $60.000 and the shipping and installation costs are $20.000 , all are paid in cash. The old machine is fully depreciated and will be sold for $5.000 cash immediately with the purchase of the new one. The useful life of the new machine is 5 years and the company uses accelerated method of depreciation. Tax rate is 20% for the company.Please find the investment cash outflow?
mani.5
A machine costs $100,000 and generates $25,000 of pre-tax operating income per year. The tax rate is 40%. The machine is in a CCA class with a 20% rate. The cost of capital is 12%. The machine is expected to last 10 years and will have no salvage value. Other assets will remain in the asset class. What is the NPV of the machine?
Corf's Dog House is considering the installation of a new computerized pressure cooker for hot dogs. The cooker will increase sales by $9,500 per year and will cut annual operating costs by $03.300. The system will cost $50100 to purchase and install. This system is expected to have a 5-year life and will be depreciated to zero using straight-line depreciation and have no salvage value. The tax rate is 40 percent and the required return is 30.8 percent. What is the NPV of purchasing the pressure cooker? Mutiple Choice O ● O $23,047 -40335 $5.603 -$2674 $6300
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
It is being decided whether the company is buying a delivery truck worth 25000 USD, which can be rented out to other warehouses in your area. For a useful life of 15 yrs, it is projected that you can earn as much as 3100 USD. At the end of its useful life, the salvage value is zero. Disregarding taxes, the ROR is projected to be approximately equal to: 7.1% 6.5% 5.3% 4.2% Other:
Provide please answer in text Format
Izmir Endustri will buy a CNC machine for 100,000 dollars. The economic life of the bench is 10 years and has no scrap value. The capital cost is 40% and a 50% tax is levied on the calculated capital cost each year. Using the accelerated depreciation method, write the current value of the depreciation, tax and tax collected each year in a tabular form, taking into account the cost of capital.

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