Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $10,000 to install themachine and Builtrite will need to keep an extra $9,000 in inventory on hand due to the machine's efficiency. The currentmachine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. Ifthe current machine were sold today, it could be sold for $45,000. In five years, the new machine is estimated to have asalvage value of $36,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine isexpected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket.What is the terminal cash flow for the new machine?O $23.760O $31,800O $32,760

Terminal cash flow is the cash flow available when equipment is used and sold at the end of project…

Answered: Builtrite is considering the purchase…

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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The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is $8,000,000, and it will cost an additional $475,000 to have it installed. The equipment has an expected life of 6 years, and it will be depreciated using a MACRS 7-year class life. Management expects to run about 150 rides per day, with each ride averaging 35 riders. The season will last for 120 days per year. In the first year, the ticket price per rider is expected to be $5.25, and it will be increased by 4% per year. The variable cost per rider will be $1.65, and total fixed costs will be $525,000 per year. After six years, the ride will be dismantled at a cost of $245,000 and the parts will be sold for $600,000. The cost of capital is 8.5%, and its marginal tax rate is 25%. Using Goal Seek, calculate the minimum ticket price that must be charged in the first year in order to make the project acceptable.
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