Firm X is considering the replacement of an old machine with one that has a purchase price of $100,000. The current market value of the old machine is $23,000 but the book value is $38,000. Thefirm's combined tax rate is 30%. What is the net cash outflow for the new machine after considering the sale of the old machine? Disregard the effect of depreciation of the new machine ifacquired. Multiple Choice $72,500 $78, 370 $84, 850 $69, 100

Net cash outflow for new machine is that amount which is paid by the investor at initial level of…

Answered: Firm X is considering the replacement…

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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A company is planning to purchase a new machine to expand its production. The machine is costing OMR 9254. The following cash inflows are expected to come for the machines. Calculate Net Present Value for Machine A using NPV given the rate of discounting to be 6.08% Years Machine A 1 3066 2 2200 3 2500 4 3600 Select one: a. -2361.71 b. 528.56 c. None of the options d. 19036.56 e. -1295.71
Accounting Your firm is selling a 3-year old machine that has a 5-year class life. The machine originally cost $580,000 and required no investment in net working capital at the time of installation. Your firm is selling the asset for $180,000. Your firm's marginal tax rate is 34%. What is the cash flow effect from selling this machine?
Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $700,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,300,000 $1,100,000 2 1,300,000 1,100,000 3 1,300,000 1,100,000 4 1,300,000 1,100,000 5 1,300,000 1,100,000 Required: Compute the investment's Net Present Value, assuming a required rate of return of 10 percent. Round present value calculations and your final answer to the nearest dollar.NPV = $fill in the blank 1
Company Z sold old machine for $180,000, the new machine could increase receipts of $200,000 while maintenance uncut $110,000 and its annual depreciation is $80,000, the new machine cost $410,000, n= 4 years. The management expects i=18% should push to buy the new machine?
Two altemnative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 25%, and an after-tax MARR of 10%. Capital investment Life Machine A $20,000 12 years $3,500 Calculate the AW value for the Machine A. AWA (10%) = $(Round to the nearest dollar.) Terminal BV (and MV) Annual receipts Annual expenses Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Machine B $34,000 9 years $2,000 $144,000 $142,000 $190,000 $163,000
Calculating EAC Barry Boswell is a financial analyst for Dossman metal works, Inc and he is analyzing two alternative configurations for the firms new plasma cutter shop. The two alternatives, denoted A and B below, will perform the same task, but alternative A will cost $85,000 to purchase, while alternative B will cost only $65,000. Moreover, the two alternatives will have very different cash flows and useful lives. The after tax costs for the two projects are as follows: year alternative a alternative b 0 $(85,000) $(65,000) 1. $(19,000) $(4,000) 2 $(19,000) $(4,000) 3 $(19,000) $(4,000) 4 $(19,000) 5 $(19,000) 6 $(19,000) 7 $(19,000) calculate each projects EAC, given a discount rate of 11 percent which of the alternatives do you think Barry should select? Why? Alternatives A EAC at a discount rate of 11% is
Esc You consider purchasing a new piece of equipment (7yr MACRS property) for your manufacturing process for $120,000. The equipment has a 6-year useful life and no salvage value. The equipment is expected to generate an additional $40,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate= 35%. Annual inflation = 4%. a. Fill in the following table assuming MACRS depreciation rates Year 46°F Rain showers 0 1 F1 2 O 2 3 4 5 Pretax income 6 MACRS Taxable Depreciation income F2 - F3 + F4 Ⓡ b. If your MARR = 12%, should you purchase this system based on your real after-tax income? Why or why not? F5 8 C B Tax owed F6 Q Search G After tax income F7 Ca 7 F8 O Inflation adjustment factor O F9 ala LG F10 Real after tax income 0 A I THE F11 - 0 1 asod F12 + Prt Sc ScrLk Post-it sod Ins Post-it Del Backspace Post-it PgUp Home asod> Post-it Mumi 1-10 PgOn End Pause Break 11-15 11-15 C
A company has purchased a machine (CCA rate 24%) at $300,000 and has a tax rate of 33.00%. By how much will the NPV change if the company is able to obtain a $13,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 11.20% and that all else remains the same. Question 10Answer a. $8,502 b. $10,415 c. -$1,913 d. $6,589 e. $10,075
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29. X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year? A. 6.0% B. 8.0% C. 12.0% D. 26.0% E. 52.0%
Trovato Corporation is considering a project that would require an investment of $62,000. No other cash outflows would be involved. The present value of the cash inflows would be $77,500. The profitability index of the project is closest to (Ignore income taxes.): Multiple Choice 0.75 O O 0.20 0.25 1.25

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