Karsted Air Services is now in the final year of a project. The equipment originally cost $28 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $6 million, and its tax rate is 30%. What is the equipment's after-tax salvage value? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar.

Non current assets are those assets which are being used by the business for more than one year.…

Answered: Karsted Air Services is now in the…

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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Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $150,000 and sell its old low-pressure glueball, which is fully depreciated, for $26,000 The new equipment has a 10-year useful life and will save $34,000 a year in expenses before tax. The opportunity cost of capital is 11%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual savings $ 16,934.51
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Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of$670,000at the end of the project's and assets ten year life. Ace's marginal tax rate is32%. The firm will have to pay$8,047,675to buy the asset. You have estimated that they could sell the asset for$787,309to a Brazilian firm at the end of the project. Answer in dollars and cents.
b. Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.
Consider an asset that costs $700,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $151,000. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset? Aftertax salvage value=
You purchased a machine for $1.19 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 22%. If you sell the machine today (after three years of depreciation) for $701,000, what is your incremental cash flow from selling the machine? Your total incremental cash flow will be $ (Round to the nearest cent.)
Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will have zero book value, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 4 cash flow? $65,000 Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $21,000 e. $30,333 33.33% $60,000 $25,000 35.0%
You purchased a machine for $1.13 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40%. If you sell the machine today (after three years of depreciation) for $710,000, what is your incremental cash flow from selling the machine?
3. Suppose that the new equipment has a cost basis of $12,000 and a salvage value of $3,000 at the end of 6 years. This asset is depreciated by the Straight-Line method. The effective income tax rate is 40 % and the after-tax MARR ic = 10%. If the company is going to sell this asset after 3 years at the market value of $6,000, what is the minimum profit per year this asset should produce to breakeven the investment? (20%)
Your company is considering a new project that will require $2,000,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $250,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice $68,250 $988,789 $175,000 $207,646
Your firm needs a machine which costs $250,000, and requires $46,000 in maintenance for each year of its 7 year life. After 5 years, this machine will be replaced. The machine falls into the MACRS 7-year class life category. Assume a tax rate of 30% and a discount rate of 12%. What is the depreciation tax shield for this project in year 7?
Please solve it as soon as possible! . Consider an asset with an initial cost of $100,000 and no salvage value. Compute the difference in the present value of the tax shields if CCA is calculated at 20% declining balance compared to if CCA is calculated using a five-year, straight line write off. For your calculation use 30% as the tax rate and 16% as the required return. (The half-year rule applies.) The difference, to the nearest dollar, is A S1.724 B $4,129 C S4.483 d. 59,517 e.$49,969

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