FAME Industries is a small business expanding its machining operations and plans to purchase 10 CNC machines for a total of $1,500,000; this is considered MACRS 5-year property. The business estimates that these machines will generate an additional revenue of $230,000 per year; they plan to keep the machines for the next 8 years. At the end of 8 years, the CNC machines would have a salvage value of $150,000. The tax rate is 26%, the CNC machines are eligible for a Section 179 deduction, and FAME Industries uses an after-tax MARR of 8%. Compute the PW and determine whether FAME Industries should invest in the CNC machines. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±20. Should FAME Industries invest in the CNC machines?
FAME Industries is a small business expanding its machining operations and plans to purchase 10 CNC machines for a total of $1,500,000; this is considered MACRS 5-year property. The business estimates that these machines will generate an additional revenue of $230,000 per year; they plan to keep the machines for the next 8 years. At the end of 8 years, the CNC machines would have a salvage value of $150,000. The tax rate is 26%, the CNC machines are eligible for a Section 179 deduction, and FAME Industries uses an after-tax MARR of 8%. Compute the PW and determine whether FAME Industries should invest in the CNC machines. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±20. Should FAME Industries invest in the CNC machines?
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
Related questions
Question
Qd 28.
Transcribed Image Text:FAME Industries is a small business expanding its machining operations and plans to purchase 10 CNC machines for a total of
$1,500,000; this is considered MACRS 5-year property. The business estimates that these machines will generate an additional
revenue of $230,000 per year; they plan to keep the machines for the next 8 years. At the end of 8 years, the CNC machines would
have a salvage value of $150,000. The tax rate is 26%, the CNC machines are eligible for a Section 179 deduction, and FAME Industries
uses an after-tax MARR of 8%. Compute the PW and determine whether FAME Industries should invest in the CNC machines.
Click here to access the TVM Factor Table calculator.
Click here to access the MACRS-GDS Property Classes.
Click here to access the MACRS-GDS percentages page.
Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.
$
Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±20.
Should FAME Industries invest in the CNC machines?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education