Explain why fixed assets are depreciated.
Q: A company is considering purchasing factory equipment that costs $327340 and is estimated to have no…
A: The cash payback period is calculated as the time it takes for the cumulative net cash flows to…
Q: ne year ago, your company purchased a machine used in manufacturing for $115.000. You have learned…
A: NPV is the most important method of project selection and can be found as the difference between…
Q: Your plant manager wants you to buy a new lathe for $410000. The lathe should be useful to your…
A: Depreciation is considered a reduction in the value of assets give two uses of that asset. We can…
Q: Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells…
A: The process that helps an entity to evaluate the feasibility and profitability of any project or…
Q: A laboratory centrifuge costs $79,000 and has a $5530 salvage value with an 8-year recovery period.…
A: Depreciation under double declining balance method is charged at the rate twice of what is used in…
Q: A tractor costs $23,940, has an expected life of 12 years, and has a salvage value of $2,100.…
A: The term "depreciation" refers to an accounting technique for estimating the costs related to a…
Q: A delivery car had a first cost of $ 34,000, an annual operating cost of $ 17,000, and an estimated…
A: Annual worth consists of the annual operating cost and equivalent annual cost of first cost with…
Q: A CNC machine costs $220,000. A facility purchases one and plans to use it for 12 years, at which…
A: Double declining depreciation rate = Straight line depreciation rate x 2 = (100/12 years) x 2 =…
Q: 7) purchase a new one or upgrade the existing machine. The existing machine has a remaining life of…
A: Present worth means present value of the project or net profit generate or cost occur during the…
Q: A high-precision programmable router for shaping furniture components is purchased by Henredon for…
A: Under declining balance method, the depreciation is charged on the book value of the assets.
Q: An automated assembly robot that cost $400,000 has a depreciable life of five years with a $100,000…
A: The book value is the cost of the assets less the depreciation for the period. The depreciation is…
Q: One year ago, your company purchased a machine used in manufacturing for $95,000. You have learned…
A: We will first compute the after-tax cash inflow from the sale of the old asset. Then we will deduct…
Q: A CNC machine costs $240,000. A facility purchases one and plans to use it for 11 years, at which…
A: Declining balance method is an accelerated depreciation method in which the depreciation expenses…
Q: A new barcode reading device has an installed cost basis of $22,820 and an estimated service life of…
A: The declining balance method is the method of calculating depreciation where higher depreciation is…
Q: One year ago, your company purchased a machine used in manufacturing for $90,000. You have learned…
A: Calculation of NPV of Replacement:To calculate the NPV of Replacement, follow the below steps:
Q: Assume you have a flower shop and you bought a delivery van for $37,000. You expect the van to…
A: DEPRECIATION EXPENSEDepreciation means gradual decrease in value of assets due to normal wear and…
Q: he Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of…
A: After tax salvage value is calculated as shown below.
Q: Five years ago, a piece of equipment was purchased at a cost of $170,000, with a salvage value of…
A: Net present value is a technique to evaluate different investment proposals and select the best one.…
Q: Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following…
A: Equipment is an asset because it is physical, can produce future economic advantages, and has a…
Q: XYZ bought an asset that cost $200,000 at the beginning of the year. It has a salvage value of…
A: Depreciation appears to be the amount through which the cost of fixed assets is reduced as a result…
Q: achine is expected to p er year. The current ma d on a straiaht-line ba
A: NPV replacement analysis can be done as follows in excel :
Q: A machine has a first cost of $10,000 and an expected salvage value of $900 when it is sold.…
A: Payback period is the period which depicts the recovery period within which the cash outflows of the…
Q: Calculate the NPV for the new and old machines. (Do not round intermediate calculations and enter…
A: Net present value is computed by deducting the initial investment from the current value of cash…
Q: A delivery car had a first cost of $40,000, an annual operating cost of $15,000, and an estimated…
A: The annual operating cost can be considered as an annuity where the future value will be A =…
Q: A delivery car had a first cost of $24,000, an annual operating cost of $15,000, and an estimated…
A:
Q: An asset costs $260,000 and is classified as a ten-year asset. What is the annual depreciation…
A: As per the table of MACRS depreciation, the depreciation rates for the three years with respect to…
Q: If the machine is purchased, annual revenues are expected to be $100,000 and annual operating…
A: Pay back period is number of years required to recover initial investment of machine.
Q: York Steel buys a new press brake for $800,000. It is expected to last twenty years and have a…
A: Depreciation is the loss in the value of the asset caused due to its usage, wear and tear.There are…
Q: Your company is analyzing two machines to determine which one it should purchase. Whichever machine…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: A project has to sell a machine that is obsolete. The market department finds a buyer who is willing…
A: The after-tax salvage value of the machine is $74,800.Explanation:To find the after-tax salvage…
Q: LLED has purchased a new chip making machine for $1,500,000 with a salvage value of $100,000 in 10…
A: Straight-line depreciation per year=Cost of asset-Salvage valueUseful life
Q: Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells…
A:
Q: A new machine costs $100,000 and is expected to last 10 years. At the end of 10 years, the salvage…
A: Calculation of depreciation percentage :- The straight line depreciation rate = 1/10 = 10% per…
Q: A delivery car had a first cost of $40,000, an annual operating cost of $18,000, and an estimated…
A: Annual worth consists of the annual operating cost and equivalent annual cost of first cost with…
Q: The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine…
A: NPV NPV is a capital budgeting tool to decide on the capital project whether it should be accepted…
Q: A conveyor system was purchased three years ago for $60,000 with an expected useful life of 10 years…
A: in this we have to calculate present value of both defender and challenger.
Q: One year ago, your company purchased a machine used in manufacturing for $115,000. You have learned…
A: Calculation of NPV of Replacement:To calculate the NPV of Replacement, follow the below steps:
Q: One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned…
A: NPV is the present value of future inflows & outflows. It is calculated by subtracting PV of…
Q: Russell Industries is considering replacing a fully depreciated machine that has a remaining useful…
A: As per the given information:To determine:The terminal cash flow.
- Explain why fixed assets are
depreciated.
- A patent is purchased at a cost of $100,000, and the buyer expects the useful life to be 20 years. What is the
adjusting entry needed at year-end?
- What is the reasoning of using the declining balance method?
- A delivery truck that costs $40,000 has a residual value of $8,000 and a useful life of 160,000 miles and the truck was driven 20,000 miles that year. Calculate the first year’s depreciation. What is the book value of the truck at the end of the first year?
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- Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…A project has to sell a machine that is obsolete. The market department finds a buyer who is willing to pay $100, 000 for the machine. The machine was purchased 4 years ago for $1.1 million. The accounting department notes that the depreciation method for this machine is straight line, and the machine will be depreciated to zero over a five year time period after purchase. What is the machine's after - tax salvage value? Tax rate is 21%. Question 1 options: $1, 635.24 $2, 314.05 $142,000.00 - $2,784.62$289.26An underground rock mechanics testing device is to be double declining depreciated. It has a first cost of $25,000 and an estimated salvage of $2,500 after 12 years. (a) What is book value and market value ? (b)Calculate the depreciation and book value for years 1 and 4. (c) Calculate the implied salvage value after 12 years.
- Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $32,000 (delivered). An additional $4,000 will be needed to install the device. The new device has an estimated 18-year service life. The estimated salvage value at the end of 18 years will be $2,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $15,000) has been in use for 9 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $2,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 10 percent. What is the NPV?A delivery car had a first cost of $36,000, an annual operating cost of $16,000, and an estimated $3500 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 3 years and must be sold now as a used vehicle. At an interest rate of 14% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? The market value of the used vehicle is determined to be $ .Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 22% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is $ (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) 200% DB Year 1 2 3 4 Book values at end of year 4 SL 150% DB (...) 0 Cost Item Hardware Training Installation Cost $165,000 $15,000 $15,000
- Pilot Plus Pens is deciding when to replace its old machine. The old machine's current salvage value is $3 million. Its current book value is $2 million. If not sold, the old machine will require maintenance costs of $500,000 at the end of the year for the next five years. Depreciation on the old machine is $400,000 per year. At the end of five years, the old machine will have a salvage value of $400,000 and a book value of $0. A replacement machine costs $4 million now and requires maintenance costs of $350,000 at the end of each year during itsfeconomic life of five years. At the end of the five years, the new machine will have a salvage value of $1,000,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $5,000,000. Pilot will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 28 percent and the appropriate discount rate is 10 percent. The company is assumed to earn sufficient…The Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of $80,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,000 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $160,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $40,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the…One year ago, your company purchased a machine used in manufacturing for $115,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over 10 years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $45,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $20,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,455 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 45%, and the opportunity cost of capital for this type of equipment is 11%. Is it profitable to replace the…
- Benson Enterprises is deciding when to replace its old machine. The machine’s current salvagevalue is $1.2 million. Its current book value is $1 million. If not sold, the old machine will requiremaintenance costs of $420,000 at the end of the year for the next five years. Depreciation on theold machine is $200,000 per year. At the end of five years, it will have a salvage value of $220,000.A replacement machine costs $3.5 million now and requires maintenance costs of $160,000 at theend of each year during its economic life of five years. At the end of five years, the new machinewill have a salvage value of $540,000. It will be fully depreciated using the three-year MACRSschedule. In five years a replacement machine will cost $4,000,000. Pilot will need to purchasethis machine regardless of what choice it makes today. The corporate tax is 35 percent and theappropriate discount rate is 10 percent. The company is assumed to earn sufficient revenues togenerate tax shields from…A new barcode reading device has an installed cost basis of $22,820 and an estimated service life of nine years. It will have a zero salvage value at that time. The 150% declining balance method is used to depreciate this asset. What is the gain (or loss) on the disposal of the device if it is sold for $3,200 after eight years?A new barcode reading device has an installed cost basis of $24,750 and an estimated service life of seven years. It will have a zero salvage value at that time. The 200% declining balance method is used to depreciate this asset. Solve, a. What will the depreciation charge be in year seven? b. What is the book value at the end of year six? c. What is the gain (or loss) on the disposal of the device if it is sold for $800 after six years?
