PLEASE HELP ME WITH THIS ACCOUNTING PROBLEM! Current Attempt in ProgressOn January 1, 2024, Waterway Company, a small machine-tool manufacturer, acquired for $2,380,000 a piece of new industrialequipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $86,500. Waterway estimatesthat the new equipment can produce 16,500 machine tools in its first year. It estimates that production will decline by 1,300 units peryear over the remaining useful life of the equipment.The following depreciation methods may be used: (1) straight-line, (2) double-declining-balance, (3) sum-of-the-years'-digits, and (4)units-of-output. For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation.(a1)Your AnswerCorrect Answer (b1)Compute accumulated depreciation by using MACRS and optional straight-line method for the 3-year period ending December31, 2026. Ignore present value considerations.MACRSMethodsOptional straight-line methodeTextbook and MediaSave for Later$$Accumulated Depreciation2024$$2025$$2026Attempts: 0 of 3 used Submit Answer

Here's the accumulated depreciation for Waterway Company's equipment using the Modified Accelerated…

Answered: Current Attempt in Progress On January…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 17P

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Depreciation Jensen Inc., a graphic arts studio, is considering the purchase of computer equipment and software for a total cost of $18,000. Jensen can pay for the equipment and software over three years at the rate of $6,000 per year. The equipment is expected to last 10 to 20 years, but because of changing technology, Jensen believes it may need to replace the system in as soon as three to five years. A three-year lease of similar equipment and software is available for $6,000 per year. Jensens accountant has asked you to recommend whether the company should purchase or lease the equipment and software and to suggest the length of time over which to depreciate the software and equipment if the company makes the purchase. Required Ignoring the effect of taxes, would you recommend the purchase or the lease? Why or why not? Referring to the definition of depreciation, what appropriate useful life should be used for the equipment and software?
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings from 24,000 to 46,000 per year. The new machine will cost 80,000, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firms WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one million tons of ore within the mine. Gimli paid $23,100,000 for the rights and expects to harvest the ore over the next ten years. The following is the expected extraction for the next five years. Year 1: 50,000 tons Year 2: 90,000 tons Year 3: 100,000 tons Year 4: 110,000 tons Year 5: 130,000 tons Calculate the depletion expense for the next five years, and create the journal entry for year one.
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Current Attempt in Progress M On January 1, 2024, Nash Company, a small machine-tool manufacturer, acquired for $1,190,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $72,200. Nash estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,140 units per year over the remaining useful life of the equipment. The following depreciation methods may be used: (1) straight-line, (2) double-declining-balance, (3) sum-of-the-years'-digits, and (4) units-of-output. For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation. (a1)
A manufacturing company is considering acquiring a new injection-molding machine ata cost of $150,000. Because of a rapid change inproduct mix, the need for this particular machine isexpected to last only eight years, after which timethe machine is expected to have a salvage value of$10,000. The annual operating cost is estimatedto be $11,000. The addition of the machine to thecurrent production facility is expected to generatean annual revenue of $48,000. The firm has only$100,000 available from its equity funds, so it mustborrow the additional $50,000 required at an interest rate of 10% per year with repayment of principal and interest in eight equal annual amounts. Theapplicable marginal income tax rate for the firm is40%. Assume that the asset qualifies for a sevenyear MACRS property class.(a) Determine the after-tax cash flows.(b) Determine the NPW of this project atMARR = 14%.
X Company is using a fully depreciated machine having a current market value of 20,000. The salvage value of the machine eight years from now would be zero. The company is considering replacing this machine by a new one costing 1,02, 500, and having an estimated salvage value of 12,500. With the use of the new machine, annual sales are expected to increase from 80,000 to 92, 500. Operating efficiencies with the new machine will save 12,500 per year as operating expenses. Depreciation will be charged on written - down basis at 25 per cent. The cost of capital is 11 per cent. The new machine has a 8-year life and the company's taxation rate is 35 per cent. Assume that book profit or loss from the sale of the asset is taxable at corporate tax rate. Should the company replace the old machine? Show calculations on incremental cash flow basis. How would your decision be affected if another new machine is available at a cost of 1,75,000 with a salvage value of 25,000. The machine is expected…
A company has decided to replace its inspection machine with an advanced one. The advanced machine costs $15,000 and will have operating costs of $3,600 in the first year, increasing by $2,000 per year thereafter. The expected salvage value of the new machine is $6,000 at the end of the first year and will decline by 10% of the preceding S.V. each year. Find the missing values in the following table and determine the economic life of the new machine. Total Cost (8%) CR (8%) OC (8%) 3,600 1 10,200 13,800 2 ? ? ... .... .. 3 4332.36 5,495.82 ? 4 ? 6,406.46 ? .......... . 3086.31 7,293.42 10,379.73 OPTIMAL n = A+ta ch Cilo
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
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A company is thinking when to replace its old machine. It has two choices: replace the old machine now, or replace it at the end of seven years. Currently, the old machine has a salvage value of $3 million and book value of $1.5 million. If it is not sold, it will require maintenance costs of $770,000 at the end of the year over the nextsix years. The depreciation expense for the machine is $300,000 per year. At the end of six years, the machine will have a salvage value of only $100,000 and a book value of $0. If the company replaces the old machine now, the new machine will cost $4.9 million and will require maintenance costs of $320,000 at the end of each year during its six years economic life. At the end of six years, the new machine will have a salvage value of $900,000. It willbe fully depreciated using the straight-line method. If the company replaces the old machine in six years, a new machine will cost $3.5 million. The company will need to purchase this machine regardless of…
Provide answer in table format B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $384,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 153,600 units of the equipment’s product each year. The expected annual income related to this equipment follows. Sales $ 240,000 Costs Materials, labor, and overhead (except depreciation on new equipment) 128,000 Depreciation on new equipment 32,000 Selling and administrative expenses 24,000 Total costs and expenses 184,000 Pretax income 56,000 Income taxes (20%) 11,200 Net income $ 44,800 1. Compute the payback period.2. Compute the accounting rate of return for this equipment.

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