Daily Enterprises is purchasing a $10.2 million machine. It will cost $51,000 to transport and install the machine. Themachine has a depreciable life of five years and will have no salvage value. The machine will generate incrementalrevenues of $3.9 million per year along with incremental costs of $1.5 million per year. If Daily's marginal tax rate is21%, what are the incremental earnings (net income) associated with the new machine?The annual incremental earnings are $(Round to the nearest dollar.)

Step 1: the calculation of the net income AB1Incremental revenues $ 3,900,000 2Incremental…

Answered: Daily Enterprises is purchasing a $10.2…

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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Ilana Industries Incorporated needs a new lathe. It can buy a new high-speed lathe for $2.0 million. The lathe will cost $31,000 per year to run, but it will save the firm $184,000 in labor costs and will be useful for 10 years. Suppose that, for tax purposes, the lathe is entitled to 100% bonus depreciation. At the end of the 10 years, the lathe can be sold for $470,000. The discount rate is 10%, and the corporate tax rate is 21%. What is the NPV of buying the new lathe? Note: A negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to 2 decimal places. NPV
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