Geary Machine Shop is considering a 4-year project to improve its production efficiency.Buying a new machine press for $697,448 is estimated to result in $179,470 in annual pretaxcost savings. The press falls in the MACRS five-year class (Refer to the MACRS table on page277), and it will have a salvage value at the end of the project of $129,270. The press alsorequires an initial investment in spare parts inventory of $59,897, along with an additional $9,967 in inventory for each succeeding year of the project. If the shop's tax rate is 0.28 and itsdiscount rate is 0.14, what is the total cash flow in year 4? (Do not round your intermediatecalculations.) (Make sure you enter the number with the appropriate +/- sign)

Free cash flow is that amount which is earned by the investor from the project. It is the net amount…

Answered: Geary Machine Shop is considering a…

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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Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $429,000 is estimated to result in $161,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS schedule) and it will have a salvage value at the end of the project of $62,000. The press also requires an initial investment in spare parts inventory of $16,700. along with an additional $3,700 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. Calculate the project's NPV.
Geary Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $551,998 is estimated to result in $166,942 in annual pretax cost savings. The press falls in the MACRS five-year class (Refer to the MACRS table on page 277), and it will have a salvage value at the end of the project of $137,823. The press also requires an initial investment in spare parts inventory of $50,617, along with an additional $13,747 in inventory for each succeeding year of the project. If the shop's tax rate is 0.37 and its discount rate is 0.12, what is the total cash flow in year 4? (Do not round your intermediate calculations.) (Make sure you enter the number with the appropriate +/- sign)
Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $460,000 is estimated to result in $ 190,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $74,000. The press also requires an initial investment in spare parts inventory of $35,000, along with an additional $3,850 in inventory for each succeeding year of the project. The shop's tax rate is 25 percent and its discount rate is 8 percent. (MACRS schedule) Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Almendarez Corporation is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $39,000. The company requires a minimum pretax return of 13% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Multiple Choice $(45,000) Q Search (((( |個個

Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $417,000 is estimated to result in $155,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS schedule) and it will have a salvage value at the end of the project of $56,000. The press also requires an initial investment in spare parts inventory of $16,100, along with an additional $3,100 in inventory for each succeeding year of the project. The shop's tax rate is 21 percent and its discount rate is 8 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Net present value
The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $26,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%) 1. Depreciation expense 2. Incremental net operating income 3. Initial investment 4.…
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $54,000. It will last 10 years with annual maintenance costs of $1,700 per year. After 10 years the machine can be sold for $5,670. Machine B could be purchased for $45,000. It also will last 10 years and will require maintenance costs of $6,800 in year three, $8,500 in year six, and $10,200 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase?
Cori's Meats is looking at a new sausage system with an installed cost of $505,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $75,000. The sausage system will save the firm $185,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $34,000. If the tax rate is 25 percent and the discount rate is 8 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 553,988.52
Kolby's Korndogs is looking at a new sausage system with an installed cost of $675,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $89,000 at the end of the project's 5-year life. The sausage system will save the firm $191,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $43,000. If the tax rate is 24 percent and the discount rate is 8 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $892,800 is estimated to result in $297,600 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $130,200. The press also requires an initial investment in spare parts inventory of $37,200, along with an additional $5,580 in inventory for each succeeding year of the project. If the shop's tax rate is 22 percent and its discount rate is 19 percent, what is the NPV for this project?
Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…
XYZ Co. is considering the purchase of a new machine. The machine will cost $250,000 and requires installation costs of $25,000. The existing machine can be sold currently for $25,070. It was purchased three years ago for $83,000 and depreciated using MACRS (5 years). It can be operated for another four years. Its market value at that time, if sold, would be $14,000. The new machine has expected life of five years and expected to provide operating cash savings of $88,000 a year for 2 years and $50,000 a year for the next two years before depreciation and taxes (EBD&T). After four years the new machine can be sold for $12,750. To support the increased business resulting from the purchase of new machine, A/R will increase by $12,000; inventory will increase by $25,000 and current liabilities by $41,000. The cost of capital is 17% and the tax rate is 40%. What is NPV? Question 9 options: $56,900 -$65,880 -$63,118 -$76,890

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