depreciated
Q: What is the purchase price of the machine?
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A: Salvage value = $125,000Tax rate = 23%
Q: 2. Super Apparel wants to replace an old machine with a new one. The new machine would increase…
A: The objective of the question is to calculate the Accounting Rate of Return (ARR) for the new…
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A: The correct option is b. $60,000 Please see the next step for the solution
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A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: 2. Super Apparel wants to replace an old machine with a new one. The new machine would increase…
A: The objective of the question is to calculate the Accounting Rate of Return (ARR) for the new…
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Q: ou must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine,…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Your company is analyzing two machines to determine which one it should purchase. Whichever machine…
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A: The after-tax salvage value of the machine is $74,800.Explanation:To find the after-tax salvage…
| Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes |
||||
| Percentage by recovery year* | ||||
| Recovery year | 3 years | 5 years | 7 years | 10 years |
| 1 | 33% | 20% | 14% | 10% |
| 2 | 45% | 32% | 25% | 18% |
| 3 | 15% | 19% | 18% | 14% |
| 4 | 7% | 12% | 12% | 12% |
| 5 | 12% | 9% | 9% | |
| 6 | 5% | 9% | 8% | |
| 7 | 9% | 7% | ||
| 8 | 4% | 6% | ||
| 9 | 6% | |||
| 10 | 6% | |||
| 11 | 4% | |||
| Totals | 100% | 100% | 100% | 100% |
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- Pizza Palace has five brick ovens that need attention and is considering two options. Both options will cost around $1,000,000 (initial investment). Option 1 is to refurbish its current brick-ovens. If refurbished, Pizza Palace expects the ovens to last another 6 years. The average annual income from refurbishing the ovens is $183,333.33. Refurbishing the ovens will have no salvage value. Option 2 is to replace the current ovens. New ovens would last 8 years and have no salvage value. The average annual income from buying a new oven is $143,750. Pizza Palace expects the following net cash inflows from the two options: Year Refurbish Current Ovens Purchase New Ovens 1 $600,000 $800,000 2 $500,000 $600,000 3 $400,000 $300,000 4 $300,000 $200,000 5 $200,000 $100,000 6 $100,000 $50,000 7 $50,000 8 $50,000 Pizza Palace uses straight-line depreciation and requires an annual return of 10%Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other rpachines, and thus will reduce downtime. Assume a discount rate of 7%. Click here to view the factor table. Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, eg. 125) Net present value $ How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.)You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $162,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $111,000. The machine would require a $9,000 increase in net operating working capital (increased Inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $42,000 per year. The marginal tax rate is 25%, and the WACC is 11%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine. a. How should the $4,500 spent last year be handled? 1. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay. II. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow.…
- 2. Super Apparel wants to replace an old machine with a new one. The new machine would increase annual revenue by $200,000 and annual operating expenses by $80,000. The new machine would cost $400,000. The estimated useful life of the machine is 10 years with zero salvage value. i. Compute Accounting Rate of Return (ARR) of the machine using above information. ii. Should Super Apparel purchase the machine if management wants an Accounting Rate of Return of 19% on all capital investments? Hint: Use Average Income or Profit after deducting tax, depreciation, and operating expenses.Mikas Hospital Ltd. is considering investing in a new production line for its pain-reliever medicine. The company has to invest in equipment which costs $2,500,000 and will be depreciated under the MACRS system for a 5-year asset class. It is expected to have a scrap value of $700,000 at the end of the project. Other than the equipment, the company needs to increase its cash and cash equivalents by $100,000, increase the level of inventory by $30,000, increase accounts receivable by $250,000 and increase account payable by $50,000 at the beginning of the project. Mikas Hospital Ltd. expect the project to have a life of five years. The company would have to pay for transportation and installation of the equipment which has an invoice price of $450,000. The company has already invested $75,000 in Research and Development and therefore expects a positive impact on the demand for the new pain-reliever. Expected annual sales for the product in the first three years are $600,000 and $850,000…Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $77,000 8 years 0 Profitability index $19,900 $4,800 Machine A Which machine should be purchased? Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative. use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B should be purchased. $188,000 8 years 0 $40,200 $9,860…
- note: can you help me answer the question for a, b and c?Muthusamy Curry Mills (MCM) is considering the purchase of a new milling equipment to replace an existing one that has a book value of $3,000 and can be sold for $1,500. The old machine is being depreciated on a straight-line basis and its estimated salvage value 3 years from now is zero. The new machine will reduce costs (before taxes) by $7,000 per year. It has a 3-year life; with an installed cost of $14,000; and it can be sold for an expected $2,000 at the end of the third year. The new machine would be depreciated over its 3-year life using the MACRS method. The applicable depreciation rates are as follows: Year 1: 33% Year 2: 45% Year 3: 15% Year 4: 7% Assume a 40% tax rate and a cost of capital of 16%. a. The initial investment associated with the replacement of the old milling equipment by the new one is? b. The incremental operating cash flows associated with the proposed replacement in Year 1 is? c. The…TLC Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently is not equipped to do. Estimates for each machine are as follows: Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Machine A $78,500 8 years Net present value $ Profitability index 0 $22,200 $4,900 Machine B Machine A Which machine should be purchased? $190,100 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 10% discount rate. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Round profitability index answers to 3 decimal places, eg. 12.521.) 8 years Calculate the net present value and…Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 7%. Click here to view the factor table. Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, eg. 125.) Net present value $ $ How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to O decimal places, e.g. 125.) 11178…
- The management of Niagra National Bank is considering an investment in automatic teller machines. The machines would cost $124,200 and have a useful life of seven years. The bank’s controller has estimated that the automatic teller machines will save the bank $27,000 after taxes during each year of their life (including the depreciation tax shield). The machines will have no salvage value. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: Compute the payback period for the proposed investment. (Round your answer to 1 decimal place.)BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Click here to view the factor table. Net present value Profitability index Machine A $78,200 8 years Which machine should be purchased? Machine B Machine A CTCALDOOK and Media $19,800 $5,130 Machine A 0 should be purchased. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B…You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $104,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $43,000. The machine would require a $5,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $56,000 per year. The marginal tax rate is 25%, and the WACC is 8%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine. a. How should the $4,500 spent last year be handled? I. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. II. The cost of research is an incremental cash flow and should be included in the analysis. III. Only the tax effect of the research expenses…
