6. Problem 12.11 (Replacement Analysis)eBookSt. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $54,000 per year.The new machine will cost $85,000, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time ofpurchase. The applicable corporate tax rate is 25%, and the firm's WACC is 12%. The old machine has been fully depreciated and has no salvage value.What is the NPV of the project? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent.$Should the old riveting machine be replaced by the new one?-Select- ↑

When employing the net present value (NPV) technique, the cash inflows that are received over the…

Answered: m eBook St. Johns River Shipyards is…

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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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
12. ABC Inc is considering investing in a new project. The project requires a $24 million investment in new equipment. According to IRS rules, the equipment can be fully depreciated straight-line over six years for tax purposes. However, ABC Inc expects to terminate the project at the end of three years and to sell the equipment for $15 million. The new project will also require use of an old machine that ABC already owns. The old machine has a salvage value of $1.5 million and a book value $2 million, both of at t = 0. If the old machine is kept rather than sold, its remaining book value can be depreciated next year (at t = 1). The project is expected to generate Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of $15 million per year for three years. (Assume the EBITDA will be received at the end of each year, so at t = 1, 2 and 3.) The project requires an investment in net working capital of $9 million at t = 0. The level of the net working capital will then…
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A project using passive heating/cooling design con- a cepts to reduce energy costs requires an investment of $125,000 in equipment (straight-line deprecia- tion with a 10-year depreciable life and $0 salvage value), and $30,000 in labor (not depreciable). At the end of 10 years, the project will be terminated. Assuming a combined tax rate of 34% and after- tax MARR of l15%, determine the project's after-tax present worth.
Please show me how to solve this in excel using an excel spreadsheet and please show the excel formulas! Thank You! A house price of $100,000 can be financed with two loans below with monthly payments. The total origination cost associated with these two loans in the table attached is $3000. Alternatively, the borrower can borrow one loan in the amount of $90,000 with monthly payments and origination cost of $2,000. What should the interest rate be on the loan of $90,000 so that the borrower will be indifferent between these two choices?
shj.8 A company is considering the purchase of a new production machine and is not sure whether the project fulfills its investment objective. The company requires that all investments must have a positive net present value (NPV). The machine costs $100,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of five years. The machine has a $0 salvage value. The project will generate $30,000 of pretax operating cash inflow annually. The company has a 25% effective income tax rate and uses a 10% discount rate for investment projects. Which of the following represents the NPV of the project? Select one: a. $(14,707) b. $(33,661) c. $13,724 d. $4,246

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