ARR Tulsian Ltd. provides you the following information: 1. Purchase Price of each Machine 1. Working Capital 3. Useful Life of each machine 4. Estimated Salvage Value at the end of useful life 5. Method of Depreciation 6. Tax Rate 7. Earning before depreciation & tax: Rs. 6,00,000 Rs. 3,00,000 5 years Rs. 1,00,000 Straight line 30% M Machine Year 1 Year 2 Year 3 Year 4 Year 5 Machine X Machine Y Machine Z 3,00,000 3,00,000 1,00,000 4,00,000 Required: Suggest which of the above machineo abaut 3,00,000 2,00,000 3,00,000 3,00,000 3,00,000 2,00,000 3,00,000 12,00,000 5,00,000 Rate of Return Mothad You are required to suggest which of the three machines should the company go for on he basis of : A. ARR method B. Payback period method

ARR Tulsian Ltd. provides you the following information: 1. Purchase Price of each Machine 1. Working Capital 3. Useful Life of each machine 4. Estimated Salvage Value at the end of useful life 5. Method of Depreciation 6. Tax Rate 7. Earning before depreciation & tax: Rs. 6,00,000 Rs. 3,00,000 5 years Rs. 1,00,000 Straight line 30% M Machine Year 1 Year 2 Year 3 Year 4 Year 5 Machine X Machine Y Machine Z 3,00,000 3,00,000 1,00,000 4,00,000 Required: Suggest which of the above machineo abaut 3,00,000 2,00,000 3,00,000 3,00,000 3,00,000 2,00,000 3,00,000 12,00,000 5,00,000 Rate of Return Mothad You are required to suggest which of the three machines should the company go for on he basis of : A. ARR method B. Payback period method

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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Book value Find the book value for the asset shown in the accompanying table, assuming that MACRS depreciation is being used Recovery period (years) 5 Elapsed time since purchase (years) 2 Asset A Installed cost $839,000 The remaining book value is $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 5 6 7 8 3 years 33% 45% 15% 7% 9 10 11 Totals Percentage by recovery year* 5 years 7 years 20% 14% 32% 19% 12% 12% 5% 25% 18% 12% 9% 8% 7% 6% 6% 6% 4% 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year 10 years 10% 18%…
Q3: A firm buys a delivery van for business use. The van costs £25,000 and is expected to last five years with an estimated scrap value of £500. Complete the following table comparing the depreciation and net book values for each year of the asset's life using the straight line and reducing balance methods of depreciation (take the rate of 50% for reducing balance). Cost Depreciation year 1 NBV end year 1 Depreciation year 2 NBV end year 2 Depreciation year 3 NBV end year 3 Depreciation year 4 NBV end year 4 Depreciation year 5 NBV end year 5
An equipment is bought for OMR 20,000 and its depreciation is charged at 10% per annum (p.a.) at written down value method. How much is the amount of depreciation at the end of the first year? a. OMR 2,000 b. OMR 20,000 c. OMR 10,000 d. OMR 1,000
Q1) A piece of machinery costs $5,000 and its useful life is five year. Compute the schedule of depreciation and book value at the end of each year for the machinery by: 1. The Sum of Years Digits method if you know that the depreciation value for the first year is $1333. 2. The Straight Line method if you know that the depreciation value for the first year is $760.
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: Annual Cost Method
A photocopier bought at 5000 dollars was put to use as follows: First year 3000 hours Second year 4500 hours Third year 3900 hours. The trade in value of the photocopier is 1000 and it has a useful life that is estimated up yo 40000 hours. You are to calculate the depreciation at the end of the 3years and completing the book value and the remaining useful value of that period
Q2. Tulsian Ltd. provides you the following information: Purchase Price of each Machine 1. Rs. 6,00,000 2. Working Capital Rs. 3,00,000 3. Useful Life of each machine 5 years Estimated Salvage Value at the end of useful life Rs. 1,00,000 Actual Salvage Value realised at the end of useful life Rs 1,20,000 Method of Depreciation 4. 5. 6. Straight line 7. Tax Rate 30% 8. Earning before depreciation & tax: Year 1 Year 2 Year 3 Year 4 Year 5 Machine 3,00,000 3,00,000 3,00,000 3,00,000 3,00,000 Machine X 1,00,000 2,00,000 3,00,000 12,00,000 Machine Y 5,00,000 4,00,000 3,00,000 2,00,000 Machine Z Suggest which machine should the company go for on the basis of: A. NPV method (Cost of Capital for the purpose is 10%) B. IRR method C. Profitability Index method (Cost of Capital for the purpose is 10%) D. Discounted Payback Period Method (Cost of Capital for the purpose is 10%)
Find the rate of depreciation by reducing balance method if the cost of the machine is rs 95000 it’s salvaged value is rs 14000 and useful life is 6 years
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A factory manager is considering the purchase of one of the following two production equipment. Cash flow estimates for equipment A are in year-zoro dollars while those of equipment B are in actual dollars Equipment A (year-zero S) Equipment B (actual $) $1,200 Initial investment $9,500 Net annual revenue $3.000 $4,000 $0 Market value at end of useful life Useful ife, years 11 11 The manager uses a market interest rate of 12% per year. If inflation rate is expected to average 5.66% per year over the next several years, determine the PW of each equipment. 1. The PW of Equipment A is OA. S14,161 OB. $14,578 OC. $12,500 OD. $0,313 2. The PW of Equipment B is O A. $20,347 OB. S15,200 OC. $20,903 OD. $12,651
A company has purchased a machine (CCA rate 27 %) at $232,000 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 4? Assume a discount rate of 10.10% and that all else remains the same. a. $13,031 b. $10,208 c. - $2,823 d. $7,385 e. $10,852

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