In conducting an EVA analysis for year 2 for a newly introduced product line, Bethune, Inc., which manufactures preassembled blowe packages and other water treatment components, determined the EVA to be $28,000. The company uses an after-tax interest rate o 14% and a Te of 29%. The initial investment capital required for the new product was $540,000 and all equipment is 3-year MACRS depreciated. Bethune's CEO knew that the gross income was $700,000, but he asked you to find out how much expense was associated with the new product line for year 2. The expenses associated with the new product line for year 2 is $

In conducting an EVA analysis for year 2 for a newly introduced product line, Bethune, Inc., which manufactures preassembled blowe packages and other water treatment components, determined the EVA to be $28,000. The company uses an after-tax interest rate o 14% and a Te of 29%. The initial investment capital required for the new product was $540,000 and all equipment is 3-year MACRS depreciated. Bethune's CEO knew that the gross income was $700,000, but he asked you to find out how much expense was associated with the new product line for year 2. The expenses associated with the new product line for year 2 is $

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

urgent A firm can purchase a centrifugal separator (5-year MACRS property) for $17,000. The estimated salvage value is $4,000 after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be$1,700. These O&M costs are projected to increase by $500 per year each year thereafter. The income tax rate is 25% and the MARR is 13% after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis? The uniform annual benefits should be........... (Round to the nearest dollar.)
An organization completes the purchase of new asset at a cost of $25,000. It has an yearly operating cost of $3,000 for delivery and installation It has a depreciable life of six (6) years at the end of which the salvage value will be $3,000 Utilizing 200% Declining Balance (DB) only, complete the table below If a returm on investment (rate of return) of 10% is requred, what is the minimum annual saving in needed? If the service life is decreased from six (6) years to five (5) years, what is the minimum annual savings for the firm to acheive a 10% return on investment? If the annual operating cost increase by 109%, what will be the minimum annual savings needed? Round all answers up the the nearest dollar (i.e. $2.322 = $3.00)
An investment of $1.000.000 will be included in the 7-year MACRS class for depreciation. It would also require an additional $150,000 to invest in inventory and would add $50,000 to accounts payable. Will generate $400000 in revenue and $150000 in cash expenses annually. The tax rate is 21 per cent. What are the incremental cash flows for years 0, 1, 7 and 8?
You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a 3-year life, and has pretax operating costs of $73,000 per year. The Techron II costs $470,000, has a 5-year life, and has pretax operating costs of $46,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $50,000. If your tax rate is 24 percent and your discount rate is 10 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Techron I Techron II
The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs $119,000 and will be depreciated at a CCA rate of 30%. Shell will lease the equipment to others and each year receive $33,100 in rent. At the end of five years, the firm will sell the equipment for $31,600. All values are presented in today's dollars. Calculate the overall present worth of these cash flows with tax effects if market interest rate is 10% and annual inflation rate is 2%. (Note: Don't use the $ sign in your answer and round it up to 2 decimal places)
A firm can purchase a centrifugal separator (5-year MACRS property) for $22,000. The estimated salvage value is $4,000 after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be $2,200. These O&M costs are projected to increase by $1,000 per year each year thereafter. The income tax rate is 24% and the MARR is 11% after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis?
Consider the proposed capital investment in an engineering project. • Proposed capital investment: $105,000 • Salvage value (end of year four): 0 • Annual expenses per year. $20,000 • Gross revenues per year: $55,000 • Depreciation method: GDS • Property Class year. 3 • Effective income tax rate (t): 35% • After-tax MARR (i): 10% • The study period is 4 years. determine a) After-tax AW b) annual equivalent EVAF
An asset is purchased for P350,00. The salvage value in 18years is P65,000/what are the depreciation in the first three years using straight line method ?
Your company has purchased equipment (for $53,000) that will reduce materials and labor costs by $16,000 each year for N years. After N years, there will be no further need for the machine, and because the machine is specially designed, it will have no MV at any time. The IRS, however, has ruled that you must depreciate the equipment on a SL basis with a tax life of five years. If the effective income tax rate is 23%, what is the minimum number of years your firm must operate the equipment to earn 10% per year after taxes on its investment? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year.
A piece of machinery has a cost basis of $50,000 and salvage value will be $5000 after 9000 hours of operation. With units of production depreciation, what is the allowable depreciation rate per hour?
Kappa Holdings is looking at a new system with an installed cost of $740,000. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the system can be salvaged for $102,000. The system will save the firm $217,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $69,000, which will be returned at the end of the project. If the tax rate is 22 percent and the discount rate is 9 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
A factory equipment has an initial cost of P200,000,00. It salvage value after 10 years is P20,000,00. As a percentage of the initial cost, what is the straight line depreciation rate of the equipment?