Q: BSU Inc. wants to purchase a new machine for $34,608, excluding $1,300 of installation costs. The…
A: A financial metric called the cash payback period is used to assess how long it will take a capital…
Q: ustries is considering replacing a fully depreciated machine that has a remaining useful life of 10…
A: Terminal cash flow is the cash flow available at the end of economic life of the equipment.
Q: Calligraphy Pens is deciding when to replace its old machine. The machine. salvage value is…
A: Old machine:Current salvage value$2,400,000.00Book value$1,475,000.00Maintenance cost of old…
Q: er Corporation is considering replacing a machine. The replacement will reduce operating expenses…
A: Operating cash flows are the cash flow generated from the operation of machine and that include tax…
Q: ose estimated salvage value is zero. Expected before-tax cash savings from the new machine are…
A: Operating cash flow is that amount which is earned by the entity from operating activity of the…
Q: Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old…
A: Free cash flow is the cash flow available from the project after considering all expenses involved…
Q: Builtrite is considering purchasing a new machine that would cost $75,000 and the machine would be…
A: Cash Flow from the project is that amount which is earned by the investor from the project every…
Q: The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had…
A: Capital budgeting techniques helps a company to select among the alternative available investment to…
Q: Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be…
A: The initial investment is amount of money required to begin the project and it consist of money…
Q: Dorothy & George Company is planning to acquire a new machine at a total cost of $37,500. The…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: Dorothy & George Company is planning to acquire a new machine at a total cost of $62,100. The…
A: The question is related to Capital Budgeting. The Net Present value is calculated with the help of…
Q: Ralph’s Bow Works (RBW) is planning to add a new line of bow ties that will require the acquisition…
A: Cash flow refers to the statement showing the transactions related to cash inflows and outflows in a…
Q: traight-line basis, resulting in a current book value of $15,000 and an a sed for six more years but…
A: Project cash flows refer to the estimated cash inflows and outflows associated with a particular…
Q: esla management are trying to decide whether to keep an older piece of machinery or buy a…
A: Depreciation is the process of reducing the value of the assets. It is a non-cash expense of the…
Q: Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of…
A: Project cash flows refer to the estimated cash inflows and outflows associated with a particular…
Q: Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old…
A: Depreciation is the decrement in the value of tangible assets by the wear and tear during the…
Q: Kendra Company is considering replacing an old machine. The old machine was purchased for $100,200…
A: Decision making is a process of choosing one alternative between two or more alternatives. In…
Q: en Supplies, Inc. must replace a machine in its manufacturing plant that will have no salvage value.…
A: NPV is the net present value and can be found as the difference between the present value of cash…
Q: Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old…
A: Project cash flows refer to the estimated cash inflows and outflows associated with a particular…
Q: Brown Company is considering the purchase of a new machine to replace an existing one. The old…
A: The capital budgeting is a tool to evaluate a project so that a decision can be made whether to go…
Q: The Zhang Equipment Company’s machine was purchased 5 years ago for $55,000. It had an expected life…
A: We have to use Macrs 5 years depreciation table to calculate depreciation.
Q: rm is contemplating replacing its 2-year old copier with a new one which is faster and easier to…
A: Terminal cash flow the final cash flow of the project when project is terminated at the expiration…
Q: Builtrite is considering purchasing a new machine that would cost $90,000 and the machine would be…
A: Cash Flow from the project is that amount which is earned by the investor from the project every…
Q: A machine shop purchased 12 years ago an Arc Welding Machine for Php 73,000.00. A straight-line…
A: cost of old machine =73000 life of old machine =18 years Annual straight line depreciation…
Q: he Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of…
A: After tax salvage value is calculated as shown below.
Q: The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost…
A: Replacement cost of the new machine = $125,000Sale proceeds of old machine = $60,000Life = 5…
Q: The Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of…
A: Net present value is calculated by deducting initial investment from present value of cash inflows.…
Q: Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old…
A: The free cash flow is the amount of cash left over after the company has paid its operational and…
Q: Calculate the NPV for the new and old machines. (Do not round intermediate calculations and enter…
A: Net present value is computed by deducting the initial investment from the current value of cash…
Q: Special Instrument company is considering replacing its machine with a new model that sells for…
A: A project could be accepted if its net present value (NPV) is positive. A positive NPV refers that,…
Q: Kendra Company is considering replacing an old machine. The old machine was purchased for $100,700…
A: Step 1:In a brief analysis for Kendra Company, considering just the financial aspects, here are the…
Q: LLED has purchased a new chip making machine for $1,500,000 with a salvage value of $100,000 in 10…
A: Straight-line depreciation per year=Cost of asset-Salvage valueUseful life
Q: Crane Inc. wants to purchase a new machine for $40,700, excluding $1,500 of installation costs. The…
A: The objective of the question is to evaluate the financial feasibility of purchasing a new machine…
Q: A small factory is considering replacing its existing coining press with a newer, more efficient…
A: Net Present Value is the capital budgeting technique used to know the profitability of the project.…
Q: KADS, Inc., has spent $300,000 on research to develop a new computer game. The firm is planning to…
A: Cash flow shows the amount of cash inflow and outflow from the company. The cash flow statement…
Q: Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another…
A: Terminal cash flow is the cash flow available when equipment is used and sold at the end of project…
Q: Two years ago, your company purchased a machine used in manufacturing for RM140,000. Although the…
A: Initial cash outflow : It includes price of equipment purchase , shipping charges , net working…
Q: The Kish Corporation is considering the purchase of a new commercial oven. company's existing oven…
A: Market value of old machine=$50000Cost of new machine=$375000Life of new machine=5 yearsAnnual…
Q: Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be…
A: The final or the last cash flow of the project which includes the salvage value of the equipment is…
Q: The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine…
A: NPV NPV is a capital budgeting tool to decide on the capital project whether it should be accepted…
Q: The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a…
A: As per the Honor code of Bartleby we are bound to give the answer of first three sub part only,…
Q: Calculate the NPV for the new and old machines
A: The net present value considers the time value of money, which expresses the notion that money…
Q: XYZ Manufacturing Corporation currently has production equipment that has 4 years of remaining life.…
A: Net Investment (NINV) is the total cost incurred at time "0" to start the project or buy the…
Q: Keep Machine operator Maintenance cost Cost of defects Depreciable value of old machine Depreciation…
A: Replacement method in capital budget in which incremental cost of replacement is compared to the…
Q: Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing…
A: Meaning of payback period and NPV:Payback period-It represents the time period required for recovery…
Q: Wildhorse Inc. wants to purchase a new machine for $38,790, excluding $1,500 of installation costs.…
A: Capital budgeting refers to the measure to evaluate various projects before investment. For this…
Q: The management of Jasper Equipment Company is planning to purchase a new milling machine that will…
A: Annual depreciation on new machine is calculated below Annual depreciation = Cost of new machine -…
The Tenang Corporation is using a machine that originally cost RM88,000.00. The machine is being
Jacqueline , the Chief Financial Officer of Tenang, is considering replacing this machine with a newer model costing RM75,000. The new machine will save RM5,000 in after-tax earnings each year for the next six years. The new machine will be depreciated using straight line method. Tenang Corporation is in the 28% tax bracket and has a 10 percent cost of capital.
REQUIRED:
- Calculate the
cash inflows from the sale of the old machine.
Step by step
Solved in 2 steps
- KADS, Inc., has spent $400,000 on research to develop a new computer game. The firm is planning to spend $200,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000. The machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS 7-year class life. Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year. The firm has a tax rate of 21 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the project. What will the cash flows for this project be? Years 0-4Nguyen Inc. is considering the purchase of a new computer system (ICX) for $140,000. The system will require an additional $20,000 for installation. If the new computer is purchased it will replace an old system that has been fully depreciated. The new system will be depreciated over a period of 8 years using straight-line depreciation. If the ICX is purchased, the old system will be sold for $20,000. The ICX system, which has a useful life of 8 years, is expected to increase revenues by $31,000 per year over its useful life. Operating costs are expected to decrease by $3,000 per year over the life of the system. The firm is taxed at a 40 percent marginal rate. Round your answers to the nearest dollar. A. what investment is required to acquire the ICX system and replace the old system? B. compute the annual net cash flows associated with the purchase of the ICX system.Ralph’s Bow Works (RBW) is planning to add a new line of bow ties that will require the acquisition of a new knitting and tying machine. The machine will cost $1.3 million. It is classified as a 7-year MACRS asset and will be depreciated as such. Interest costs associated with financing the equipment purchase are estimated to be $50,000 per year. The expected salvage value of the machine at the end of 10 years is $80,000. The decision to add the new line of bow ties will require additional net working capital of $55,000 immediately, $30,000 at the end of year 1, and $10,000 at the end of year 2. RBW expects to sell $370,000 worth of the bow ties during each of the 10 years of product life. RBW expects the sales of its other ties to decline by $23,000 (in year 1) as a result of adding this new line of ties. The lost sales level will remain constant at $23,000 over the 10-year life of the proposed project. The cost of producing and selling the ties is estimated to be $70,000 per year.…
- International Soup Company is considering replacing a canning machine. The old machine is being depreciated by the straight-line method over a 10-year recovery period from a depreciable cost basis of $120,000. The old machine has 5 years of remaining usable life, at which time its salvage value is expected to be zero, and it can be sold now for $40,000. This machine has a current book value of $60,000. The purchase price of the new machine is $250,000. Employees were sent to a training course last year on how to use the new machine; this training cost $5,000. The new machine has a 5-year life and an expected salvage value of $25,000. Annual savings of electricity, labor, and materials from use of the new machine are estimated at $40,000. The company is in a 40 percent tax bracket and its cost of capital is 16 percent. The MACRS depreciation method will be used and the recovery percentages for assets with a 5-year class life are given below: What is the initial cash outlay for the…Pilot Plus Pens is deciding when to replace its old machine. The old machine's current salvage value is $3 million. Its current book value is $2 million. If not sold, the old machine will require maintenance costs of $500,000 at the end of the year for the next five years. Depreciation on the old machine is $400,000 per year. At the end of five years, the old machine will have a salvage value of $400,000 and a book value of $0. A replacement machine costs $4 million now and requires maintenance costs of $350,000 at the end of each year during itsfeconomic life of five years. At the end of the five years, the new machine will have a salvage value of $1,000,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $5,000,000. Pilot will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 28 percent and the appropriate discount rate is 10 percent. The company is assumed to earn sufficient…The Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of $80,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,000 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $160,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $40,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the…
- BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) years The investment Assuming the company has a required rate of return of 10%, determine whether the new machine…Tesla management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following information to assist in their decision: A machine purchased three years ago for $314,000 has a current book value using straight-line depreciation of $187,000; its operating expenses are $38,000 per year. A replacement machine would cost $237,000, have a useful life of ten years, and would require $9,000 per year in operating expenses. It has an expected salvage value of $74,000 after ten years. The current disposal value of the old machine is $83,000; if it is kept ten more years, its residual value would be $14,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Keep Old Machine Total costs Should the old machine be replaced? Purchase New Machine I YesMetlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43.500. The new equipment can be bought for $173,440, including installation. Over its 10-year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years.…
- Benson Enterprises is deciding when to replace its old machine. The machine’s current salvagevalue is $1.2 million. Its current book value is $1 million. If not sold, the old machine will requiremaintenance costs of $420,000 at the end of the year for the next five years. Depreciation on theold machine is $200,000 per year. At the end of five years, it will have a salvage value of $220,000.A replacement machine costs $3.5 million now and requires maintenance costs of $160,000 at theend of each year during its economic life of five years. At the end of five years, the new machinewill have a salvage value of $540,000. It will be fully depreciated using the three-year MACRSschedule. In five years a replacement machine will cost $4,000,000. Pilot will need to purchasethis machine regardless of what choice it makes today. The corporate tax is 35 percent and theappropriate discount rate is 10 percent. The company is assumed to earn sufficient revenues togenerate tax shields from…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…Dorothy & George Company is planning to acquire a new machine at a total cost of $37,500. The machine's estimated life is 6 years and its estimated salvage value is $600. The company estimates that annual cash savings from using this machine will be $8,200. The company's after-tax cost of capital is 7% and its income tax rate is 40%. The company uses straight-line depreciation. (Use Appendix C, Table 1 and Appendix C, Table 2.) (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round answers to the nearest dollar amount.) Required: 1. What is this investment's net after-tax annual cash inflow? 2. Assume that the net after-tax annual cash inflow of this investment is $6,000; what is the net present value (NPV) of this investment? 3. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable (i.e., the dollar cost savings that would yield an NPV of $0)? Hint: Redo the NPV analysis by setting the NPV…
