None Machine Technotronic costs $2,000,000, has a four-year life with expected salvage value inthree years of $716,800, and has pre-tax operating costs of $480,000 per year. Machine is inClass 8 (CCA rate of 20 percent per year, Accelerated Investment Incentive in the first year isapplied). If your tax rate is 35 percent and your discount rate is 19 percent, compute the EAC(equivalent annual cost) for Machine Technotronic.Give the answer in thousands of dollars without decimal places, rounding to the nearestthousand (e.g., if the answer would be $154,790.34, give 155; or if the answer would be$154,392.28, give 154).Answer:

Step 1: First step is to compute the Net Present Value. In this case, the NPV is equal to the…

Answered: Machine Technotronic costs $2,000,000,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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Machine Technotronic costs $2,000,000, has a four-year life with expected salvage value in three years of $716,800, and has pre-tax operating costs of $480,000 per year. Machine is in Class 8 (CCA rate of 20 percent per year, Accelerated Investment Incentive in the first year is applied). If your tax rate is 35 percent and your discount rate is 19 percent, compute the EAC (equivalent annual cost) for Machine Technotronic. Give the answer in thousands of dollars without decimal places, rounding to the nearest thousand (e.g., if the answer would be $154,790.34, give 155; or if the answer would be $154,392.28, give 154). Answer:
New equipment costs $847,000 and is expected to last for five years with the salvage value of 10% of the equipment cost. During this time the company will use a 20% CCA rate. The new equipment will save $280,000 annually before taxes. If the company's required rate of return is 5.35%, determine the PVCCATS of the purchase. Assume a tax rate of 35%. Please show all the calculations by which you came up with the final answer.
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