Guelph Inc. would like you to assess the after-tax viability of a new machine using annual worth analysis. The machine costs $1,000,000 and are expected to save the company $175,000/y for the next 15 years. Guelph Inc. plans to sell the machine at the end of 15 years. The estimated salvage value of the machine at the end of its life is unknown, but Guelph Inc. suspects its depreciation will be similar to the CCA rate for the machine: 20%. Should Guelph Inc. invest in the machine, assuming they use an annual MARR of 10% and their corporate tax rate is 30%?
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- Guelph Inc. would like you to assess the after-tax viability of a new machine using annual worth analysis. The machine costs $1,000,000 and are expected to save the company $175,000/y for the next 15 years. Guelph Inc. plans to sell the machine at the end of 15 years. The estimated salvage value of the machine at the end of its life is unknown, but Guelph Inc. suspects its depreciation will be similar to the CCA rate for the machine: 20%. Should Guelph Inc. invest in the machine, assuming they use an annual MARR of 10% and their corporate tax rate is 30%?Blossom Company is considering the purchase of a new machine. The invoice price of the machine is $151,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000. The salvage value of the new equipment is expected to be zero after a useful life of 5 years. The company could retain the existing equipment and use it for an additional 5 years if it doesn't purchase the new machine. At that time, the equipment's salvage value would be zero. If Blossom purchases the new machine now, it would have to scrap the existing machine. Blossom's accountant, Donna Clark, has accumulated the following data for annual sales and expenses, with and without the new machine: 1. 2. 3. Without the new machine, Blossom can sell 13,000 units of product annually at a per-unit selling price of $100. If it purchases the new machine, the number of units produced and sold would increase by 10%, and the selling price would remain the same. The new machine is faster than the old…Zhang Company is considering the purchase of a new machine. Its invoice price is $200,000, freightcharges are estimated to be $4,000, and installation costs are expected to be $6,000. Salvage value ofthe new machine is expected to be zero after a useful life of 4 years. Existing equipment could beretained and used for an additional 4 years if the new machine is not purchased. At that time, thesalvage value of the equipment would be zero. If the new machine is purchased now, the existingmachine would be scrapped. Zhang’s accountant, Victor Wang, has accumulated the following dataregarding annual sales and expenses with and without the new machine.Without the new machine, Zhang can sell 10,000 units of product annually at a per unit selling price of$100. If the new unit is purchased, the number of units produced and sold would increase by 25%, andthe selling price would remain the same.The new machine is faster than the old machine, and it is more efficient in its usage of materials.…
- BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) years The investment Assuming the company has a required rate of return of 10%, determine whether the new machine…Aurora is considering the purchase of a new machine. Its invoice price is $250,000, freight charges are estimated to be $9,000, and installation costs are expected to be $6,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped. Aurora’s accountant, has accumulated the following data regarding annual sales and expenses with and without the new machine. Without the new machine, Aurora can sell 12,000 units of product annually at a per unit selling price of $80. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same. The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old…Aurora is considering the purchase of a new machine. Its invoice price is $250,000, freight charges are estimated to be $9,000, and installation costs are expected to be $6,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped. Aurora’s accountant, has accumulated the following data regarding annual sales and expenses with and without the new machine. Without the new machine, Aurora can sell 12,000 units of product annually at a per unit selling price of $80. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same. The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old…
- Startle Corporation wants to purchase a new production machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $65,000 (book value is $73,000). The new machine will cost $600,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $50,000 will be required if the new machine is purchased. The investment is expected to generate $75,000 in before tax cash net inflows during the first year of operation. The expected before tax cash net inflow for years two through five is $220,000 each year. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at…Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.Sandhill Inc. wants to purchase a new machine for $37,840, excluding $1,300 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,100, and Sandhill Inc. expects to sell it for that amount. The new machine will decrease operating costs by $8,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.Click here to view the factor table.(a)Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period enter the cash payback period in years rounded to 2 decimal places years (b)Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return enter the internal rate of return in…
- Key Corp. plans to replace a production machine that was acquired several years ago. Acquisition cost is P450,000 with salvage value of P50,000. The machine being considered is worth P800,000 and the supplier is willing to accept the old machine at a trade-in value of P60,000. Should the company decide not to acquire the new machine, it needs to repair the old one at a cost of P200,000. Tax-wise, the trade-in transaction will not have any implication but the cost to repair is tax-deductible. The effective corporate tax rate is 35% of net income subject to tax. For purposes of capital budgeting, the net investment in the new machine is * A. P540,000 B. P610,000 C. P660,000 D. P800,000 Other:Hancock Company is trying to make a decision as to whether it should purchase of a new piece of equipment. The invoice price of the equipment is $140,000 with an estimate of $4,000 in freight charges and installation costs are expected to be $6,000. The Company expects that the salvage value of the new equipment will be zero after a useful life of 5 years. If the new machine is not purchased, the Company’s existing equipment could be retained and used for an additional 5 years. At that time, the salvage value of the existing equipment would be zero. If the new machine is purchased now, the existing machine would have to be scrapped. The following is data regarding annual sales and expenses with and without the new machine: Without the new machine, Hancock can sell 12,000 units of product annually at a per unit selling price of $100. If the new machine is purchased, the number of units produced and sold would increase by 10%, and the selling price would remain the same.…Sunland Inc. wants to purchase a new machine for $31,310, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,300, and Sunland Inc. expects to sell it for that amount. The new machine will decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view PV table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period years (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % (c) Assuming the company has a required rate of return of 9%, determine whether the new machine should be purchased. The…