Ises piece the current equipment. The new equipment costs $75,000 and requires $5,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period. The old piece of equipment was purchased 4 years ago for an installed cost of $50,000; it was being depreciated under MACRS using a 5-year recovery period. The old equipment can be sold today for $55,000 net of any removal or cleanup costs. As a result of the proposed replacement, the firm's investment in net working capital is expected to increase by $15,000. The firm pays taxes at a rate of 40%.

Ises piece the current equipment. The new equipment costs $75,000 and requires $5,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period. The old piece of equipment was purchased 4 years ago for an installed cost of $50,000; it was being depreciated under MACRS using a 5-year recovery period. The old equipment can be sold today for $55,000 net of any removal or cleanup costs. As a result of the proposed replacement, the firm's investment in net working capital is expected to increase by $15,000. The firm pays taxes at a rate of 40%.

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 directed (traight Builtrite is considering purchasing a new machine that would com $80,000 and the machine line) down to $0 over its five-year life. At the end of five years, it is believed that the machine could the side for $15,000 The surrent machine being used was purchased 3 years ago at a cost of $40,000 and is being direct din ter over t 5 year life. The current machine's salvage value now is $12,000. The new machine would increase EBOT by $54000 annually Builtrite's marginal tax rate is 34%, What the RATFOF's associated with the purchase of this machine? $39,040 $38,360 $30,300 $35,040.
Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $10,000 to install the machine and Builtrite will need to keep an extra $9,000 in inventory on hand due to the machine's efficiency. The current machine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. If the current machine were sold today, it could be sold for $45,000. In five years, the new machine is estimated to have a salvage value of $36,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine is expected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket. What is the terminal cash flow for the new machine? O $23.760 O $31,800 O $32,760
Parker, Inc purchased new equipment for $57,400. The new equipment would save on operating costs over the next 5 years as follows: $22,500 in year 1; $22,200 in year 2; $23,200 in year 3; $12,600 in year 4; and $11,000 in year 5. The payback period for the new equipment is ______ years
Rahul
Lifeline Biofuels bult an oil rig at a cost of $4.5 million that it places into service on the first day of the current year. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The expected fair value of this asset retirement project is $845,000. The present value of these asset retirement costs is $263,000 based on the 6% after - tax discount rate Under US. GAAP, what is the company's accretion expense for the first year? A. $42,250 OB. $15.780 OC. $13,150 OD. S0
with diagram thank you
A certain corn mill decided to sell its old engine which has been used for 5 years costing P7,200 new. The average operating cost per year thus far has been P4,200. The replacement costing P12,000 has an estimated life of 15 years, estimated annual operating cost 20% lower than that of the old engine. If interest is 5% and using straight-line depreciation, how much must the old engine be sold if its working life and its salvage value have been assumed as 15 years and P500, respectively? Actual total cost for the old engine considering depreciation, interest and operation is P347 less than that of the new. Salvage value of the replacement is P800. O P4,949.73 O P3, 899.27 O P4, 021.33 O P4. 051.27
A heavy equipment rental company intends to replace a grader. It was purchased 5 years ago at a cost of $120,000. It was estimated to have a useful life of 10 years. It could be traded in now for $20,000. Due to frequent breakdown and repairs it was rented out for only 1,400 hours during the past year and the total repair cost was $6,000. A new grader is now available costing $200,000 and it is predicted to have an economic life of 10 years. It is expected to be rented at least 2,100 hours a year and maintenance cost will not exceed $3,500. All other out-of-pocket costs for the two machines would equal. If money is worth 15%, what must be the hourly rental rate for the new grader so that it could replace the old one?
Please help me
note: can you help me answer the question for s, t and u? Lee Wah Press (LWP) is considering a leasing arrangement to finance some special printing machines that it needs for production during the next three years. A planned change in the company’s production technology will make the new machine obsolete after 3 years. LWP will depreciate the new machine on a straight-line basis towards zero salvage value. The firm can borrow the installed cost of $480,000, at 10% interest per annum, calculated on an annual reducing balance, to buy the new machine or make three equal beginning-of-year lease payments of $210,000 should it decide to take up lease financing. Annual maintenance costs associated with ownership, payable at the end of year, are estimated at $25,000. Annual insurance premium associated with the purchase is estimated to be at $6,000, payment is on a cash-before-cover basis. Should LWP opt for lease financing, all other costs will be borne by the lessor. LWP tax rate is 40%.…
Your Corporation bought a stamping machine to make the cans. The cost of the machine was $60,000. The machine has a useful life of 5 years and a salvage value of zero at the end of those five years. The variable manufacturing cost of producing the cans is $0.05 per can. The only fixed manufacturing cost is the annual depreciation of $12,000 on the stamping machine. Your Corporation needs 200,000 cans annually. Another Company recently offered to supply all of the can needs for the next four years at $0.07 per can. If Your Company buys the cans, it can sell the stamping machine right now for $35,000. If Your Company buys the cans, what will be the total dollar increase or decrease in income for the total four years? Enter an incrase as a positve number. Enter a decrease with a minus sign in front.
Andres Gimenez is considering purchasing the DoublePlay 3000 machine. The machine will cost Ahmed $100,000 and he estimates it will last two years after which he will sell the machine for $30,000. The machine is considered specialty equipment under MACRS depreciation and depreciated over 4 years as shown below. The tax rate is 40%. Revenue Fixed Costs SG&A expenses Depreciation I EBIT Taxes Year 1 Year 2 $125,000 $ 125,000 $ 40,000 $ 40,000 20,000 20,000 33,333 44,450 $ 31,667 $ 20,550 8,220 12,667 Net Income $19,000 $ 12,330 1. What is the net present value of the investment, assuming an interest rate of 10%? 2. What is the internal rate of return of the investment?

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