EE printing is in the evaluation process for the acquisition of a new computer system. The total depreciablebase (cost plus installation) is $180,000.The new equipment will increase Earnings before depreciation and taxes by $60,000 during years 1 to 3 and$32,000 during years 4 to 6.EE marginal tax rate is 40% and Cost of Capital is 11%Calculate the Payback PeriodPRESENT YOUR ANSWER ROUNDED TO 2 DECIMAL PLACES

Payback period is a financial metric used to evaluate the length of time it takes to recoup the…

Answered: EE printing is in the evaluation…

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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Required information A potential investment has a cost of $380,000 and a useful life of 6 years. Annual cash sales from the investment are expected to be $267,382 and annual cash operating expenses are expected to be $105,332. The expected salvage value at the end of the investment's life is $40,000. The company has a before-tax discount rate of 15%. Required: Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter negative amounts with a minus sign.) Annual PMT of the investment FV of the investment NPV of the investment IRR of the investment $ 162050 GA 69 40000
Required information A potential investment has a cost of $425,000 and a useful life of 5 years. Annual cash sales from the investment are expected to be $225.225 and annual cash operating expenses are expected to be $88,725. The expected salvage value at the end of the investment's life is $45,000. The company has a before-tax discount rate of 18%. Required: Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (.e. 055-5.5%). Enter negative amounts with a minus sign) Annual PMT of the investment FV of the investment NPV of the investment IRR of the investment
A firm can purchase a centrifugal separator (5-year MACRS property) for $22,000. The estimated salvage value is $4,000 after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be $2,200. These O&M costs are projected to increase by $1,000 per year each year thereafter. The income tax rate is 24% and the MARR is 11% after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis? CAN YOU DO THIS PROBLEM BY HAND? AND NOT USING EXCEL I WOULD REALLY APPRECIATE IT!!!!
As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues, each year $45,500 Other operating costs $22,522 Interest expense $4,000 Tax rate 25.0%
Project the OCFs for the next three years considering incomes of $165k, $170K and $180 respectively, and a depreciation of $15K, $16K and $18K respectively. Consider a tax of 25%. (Use the following format: "$11.111; $11.111; $11.111) Answer. $65.588;$69.325;$76.800 Then, calculate the NPV (of the three years projected, don't include the current one) if your investment is $150K and the cost of opportunity is 10% (use the following format: $11.111) Answer $24.619 Decide if you invest or not in this project (use the following format: "Yes" or "No") Answer NoI need the process please
answer is 2.9 years. Please show your solution MANUALLY. don't use excel or financial calculator Topper Manufacturing is considering converting a step in its manufacturing process to an automated process. The machinery identified for this capital investment will cost $410,000 with a four-year useful life and no salvage value. Topper Manufacturing uses straight-line depreciation for all equipment. Its effective tax rate is 30%. Management estimates that the investment will provide before-tax operating cash flows of $198,500 per year before consideration of any tax shields from depreciation expense. Based on this information, what is the project's discounted payback period assuming management has set a 10% hurdle rate on similar projects?
Accounting Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $7,500 per month. The new equipment will have a five-year life and cost $320,000, with an estimated salvage value of $20,000. Lakeside's cost of capital is 12%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.)
Required information A potential investment has a cost of $395,000 and a useful life of 5 years. Annual cash sales from the investment are expected to be $255,338 and annual cash operating expenses are expected to be $100,588. The expected salvage value at the end of the investment's life is $50,000. The company has a before-tax discount rate of 17%. Required: Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter negative amounts with a minus sign.) Annual PMT of the investment FV of the investment NPV of the investment IRR of the investment 0000 $
Macrohard Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 35 %, 43%, 17%, and 5% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. Equipment cost (depreciable basis) P78,000 Sales revenues, each year 50,000 Operating costs (excl. depreciation) 25,000 Tax rate 25.0% The following are the questions/requirements for this data set. Fill-up the answers in the next 3 questions: (Round final answers to nearest peso) Year 1 Operating Cash Flow • Year 3 Operating Cash Flow Year 5 Operating Cash Flow
A firm has invested $50,000 in equipment with a 5-year useful life. The machinery will have a salvage value of $5,000. The annual benefits from the machinery are $13,000 for the first year and increase by $2,000 per year. Assume a combined 30% income tax rate, and the firm uses the SOYD depreciation. Calculate the before-tax IRR. Calculate the after-tax IRR.
The owner of a bicycle repair shop forecasts revenues of $220,000 a year. Variable costs will be $65,000, and rental costs for the shop are $45,000 a year. Depreciation on the repair tools will be $25,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. Depreciation Pretax profit INCOME STATEMENT 0 $ 0 b. Calculate the operating cash flow for the repair shop using the three methods given below. i. Dollars in minus dollars out. ii. Adjusted accounting profits. iii. Add back depreciation tax shield. Methods of Calculation i. Dollars in Minus Dollars Out ii. Adjusted Accounting profits iii. Add back depreciation tax shield Operating Cash Flow
The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $277,000 and expenses by $184,000. The project will require $93,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 21 percent. What is the depreciation tax shield? Multiple Choice $19,530 $9,695 $12,245 $6,440 $3,255

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