3 Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of...nner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs$55,000 before income taxes. The machine costs $150,000, has a useful life of five years, and no salvage value. Tanner usesraight-line depreciation on all assets, is subject to a 10% Income tax rate, and has an after-tax hurdle rate of 10%.Year123456FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuityat 10%at 10%10%1.1001.2101.3311.4641.6111.7721.0002.1003.3104.6416.1057.716A. Rate of returnB. Net present value10%0.9090.8260.7510.6830.6210.564equired:Compute the machine's accounting rate of return on the initial investment.. Compute the machine's net present value.Note: For all requirements, do not round Intermediate calculations. Round final answers to whole number.%0.9091.7362.4873.1703.7914.355www

The ARR and NPV are the two different capital budgeting tools that can be used by an investor to…

Answered: B Problem 16-142 (Algo) Tanner…

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

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38
Intro Time Weiner Inc. is now at the end of the final year of a project. The firm originally bought some project equipment for $46,000, which could now be sold for $27,600. 44% of the equipment cost has already been depreciated. The company's tax rate is 34%. Part 1 What is the after-tax salvage value? If the equipment's final market value is less than its book value, the firm will receive a tax credit as a result of the sale. 0+ decimals Attempt 1/1 Save
Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $14.4 million, of which 85% has been depreciated. The used equipment can be sold today for $4.8 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $
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59 A corporation uses net present value techniques in evaluating its capital investment projects. The company is considering a new equipment acquisition that will cost P100,000, fully installed, and have a zero salvage value at the end of its five-year productive life. The corporation will depreciate the equipment on a straight-line basis for both financial and tax purposes. The corporation estimates P70,000 in annual recurring operating cash income and P20,000 in annual recurring operating cash expenses. The corporation's desired rate of return is 12% and its effective income tax rate is 30%. What is the net present value of this investment on an after-tax basis?
9
1. Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.82 million. The marketing department predicts that sales related to the project will be $2.52 million per year for the next four years, after which the firm expects to sell it for $500,000. The machine is a five-year class asset and will be depreciated down to zero over five years under the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. Howell also needs to add net working capital of $200,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 35 percent. The required rate of return (or discount rate) for the project is 12.5 percent. Compute the NPV, IRR, and payback period of the project. The firm’s acceptable payback period is 3 years. Is this project acceptable to the firm?
3. Power Coal Mine Bhd is considering a new mining pit to increase its productionoutput. The company will have to pay $25 million for the rights to mine on thegovernment land. The infrastructure development costs will amount to another $12million. It is anticipated that the mine should generate annual net revenue of $10million for 15 years. When the mine is closed at the end of the fifteenth year, $10million will be spent for reclamation work. The company’s MARR is 10%per year.a.Draw a cash flow diagram for the above proposal.b. Compute the equivalent present worth (PW) of the proposal.c. Determine the minimum annual net revenue required for the proposal tobreakeven. Assume that costs of rights to mine, development, andreclamation remain the same.
Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $23.2 million, of which 85% has been depreciated. The used equipment can be sold today for $5.8 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
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12-3 AFTER-TAX SALVAGE VALUE Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 75% has been depreciated. Karsted can sell the used equipment today for $8 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?

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