**Daily Enterprises' Machine Investment Analysis**Daily Enterprises plans to invest in a machine costing $10.4 million, with additional transportation and installation expenses of $47,000. The machine has a depreciable lifespan of five years with no salvage value. It is expected to generate annual incremental revenues of $4.2 million and incur incremental costs of $1.4 million each year. Daily's marginal tax rate is 21%.**Objective:** Calculate the annual incremental earnings (net income) associated with the new machine.**Calculation:**\[ \text{Incremental Revenues} = \$4.2 \, \text{million/year} \]\[ \text{Incremental Costs} = \$1.4 \, \text{million/year} \]1. **Incremental Profit Before Tax:** \[ \text{Profit Before Tax} = \text{Incremental Revenues} - \text{Incremental Costs} \] \[ = \$4.2 \, \text{million} - \$1.4 \, \text{million} = \$2.8 \, \text{million/year} \]2. **Tax Expense:** \[ \text{Tax Expense} = \text{Profit Before Tax} \times \text{Tax Rate} \] \[ = \$2.8 \, \text{million} \times 21\% = \$0.588 \, \text{million/year} \]3. **Incremental Earnings (Net Income):** \[ \text{Net Income} = \text{Profit Before Tax} - \text{Tax Expense} \] \[ = \$2.8 \, \text{million} - \$0.588 \, \text{million} = \$2.212 \, \text{million/year} \]**Conclusion:**The annual incremental earnings are **$2,212,000**. (Rounded to the nearest dollar.)Feel free to use these calculations in your financial assessments!

Due to new machine introduced by the company revenue of the company increase but cost also increases…

Answered: Daily Enterprises is purchasing a $10.4…

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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