Golddex Corporation has decided to sell some old equipment to make room for a new project. The salvage value ofthe equipment is $220,000. The firm would be able to recover $60,000 in working capital when the equipment issold. Their tax rate is 21%. The old equipment has a book value of $140,000. What is the terminal cash flow?$87,400$227,400O $198,000O $187,400O $263,200

The question is based on the concept of calculation of terminal cash flow, which is the net cash…

Answered: Golddex Corporation has decided to sell…

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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The management of Nixon Corporation is investigating purchasing equipment that would cost $558,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $384,000 per year and cash operating expenses by $221,000 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment. (Round your answer to 1 decimal place.) Simple rate of retum %
Betatech has some slightly obsolete equipment that still has a book value of $280,000 on their balance sheet. They can sell the equipment now for $210,000, and they would recover $40,000 in working capital. Their tax rate is 21%. If they sell the equipment, what would be the terminal cash flow? O $264,700 O $268,900 O $205,900 O $228,900 O $165,900
Grumpy Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years he press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The investments internal rate of return (rounded to the nearest percent) is: O 16 percent O 14 percent O 12 percent O 10 percent
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6. A drill press costs $30,000 and is expected to have a 10 year life. The drill press will be depreciated on a straight-line basis over 10 years to a zero estimated salvage value. This machine is expected to reduce the firm's cash operating costs by $4,500 per year. If the firm is in the 40 percent marginal tax bracket, determine the annual net cash flows generated by the drill press.
1. what amount should be used as the initial cash flow for this project and why?? 2. What is the after-tax salvage value for the spectrometer? 3. What is the MPV of the project? Should the firm accept or reject this project?
Homer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $143,000. The equipment will have an initial cost of $550,000 and have a 5-year life. If the salvage value of the equipment is estimated to be $18,000, what is the annual net cash flow? Multiple Choice 3 $125,000 $36,600 $249,400 $161,000
5. Does your company want to purchase this machine that will provide cost savings of $100,000 annually for its useful life (8 years)? The cost is $250,000; tax rate is 36% and discount rate is 14%. Compute straight-line depreciation for 8 years with zero salvage value. Calculate the cash flows and determine the NPV and IRR. Does your company want to buy this machine?
Firm X is considering the replacement of an old machine with one that has a purchase price of $70,000. The current market value of the old machine is $22,000 but the book value is $ 37,000. The firm's combined tax rate is 27%. 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 if acquired.
A project will increase sales by $184,500 and cash expenses by $88,900. The project will require investment in equipment of $53,000 and be depreciated using straight line depreciation to a zero book value over the four-year life of the project. The company has a marginal tax rate of 21 percent. What is the operating cash flow of the project? $108,552.25 None of these options are correct o $78,306.50 $75,524.00 o $95,600.00
A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? O $9,350 O $9,700 O $8,650 O $5,850

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