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 %
Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Each equipment will last 5 years and have no salvage value at the end. The company's required rate of return for all investment projects is 89%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186,000 S195,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 86 000 93 000 83 000 75 000 55 000 97 000 84 000 86 000 75 000 63 000 Required: a) Identify which option of eauipment should the company accept based on Profitability Index? (.. b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?
Bunnings Ltd is considering to invest in one of the two following projects to buy a new equipment. Esch equipment will last 5 years and have no salvage value at the end. The company's required rate of retum for all investment projects is 89%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $186,000 $195,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 86 000 93 000 83 000 75 000 55 000 97 000 84 000 86 000 75 000 63 000 Required: a) Identify which option of equipment should the company accept based on Profitability Inde * b) Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 2 years?
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
Acme
Acme is considering the sale of a machine with a book value of $80,000 and 3 years remaining in its useful life. Straight-line depreciation of $25,000 annually is available. The machine has a current market value of $100,000. What is the cash flow from selling the machine if the tax rate 40%. a. $25,000 b. $80,000 C. $92,000 d. $100,000 D, L & H 9e
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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?
Giant Machinery Ltd is considering to invest in one of the two following Projects to buy a newequipment. Each project will last 5 years and have no salvage value at the end. The company’s requiredrate of return for all investment projects is 9%. The cash flows of the projects are provided below.Project 1 Project 2Cost $175,000 $185,000Future Cash FlowsYear 1Year 2Year 3Year 4Year 576,00083,00067,00065,00055,00087,00078,00069,00065,00057,000 Identify which project should the company accept based on NPV method.
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

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