Main Content Net Revenue Years 1 Investment You are thinking about buying a new Hot Dog cart for $7,760. Based on what the manufacturer tells you about maintenance costs and your estimate of revenues you should be able to make around $13,700 per year, for the next 7 years. Market value for the cart at that time should be about $450. According to the current asset class table the allowable depreciation rate for Hot Dog carts is 27%. If your business' tax rate is 49% and your after-tax MARR is 5%, what is the after tax annual worth of this investment? Use four decimal place accuracy for the CTF and CSF.

Main Content Net Revenue Years 1 Investment You are thinking about buying a new Hot Dog cart for $7,760. Based on what the manufacturer tells you about maintenance costs and your estimate of revenues you should be able to make around $13,700 per year, for the next 7 years. Market value for the cart at that time should be about $450. According to the current asset class table the allowable depreciation rate for Hot Dog carts is 27%. If your business' tax rate is 49% and your after-tax MARR is 5%, what is the after tax annual worth of this investment? Use four decimal place accuracy for the CTF and CSF.

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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PROBLEM 1. New Project You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35%, and the WACC is 12%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine. What are the project's annual net cash flows during Years 0 through 3?
Net Present Value Method for a Service Company Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $46,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of $7,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $61,000 per year for each of the next five years. A driver will cost $41,000 in 20Y1, with an expected annual salary increase of $3,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Determine the…
Question 1 Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000. The machine has an estimated life of 6 years. It is estimated that the machine's maintenance expenses are around $15,600 per year and a full-time worker will be employed at a wage of S150,000 per year to operate the machine. Eden expects to generate income by producing 348,500 item X in the first 3 years, 235,000 in the 4th year and 225,000 in the 5th and 6th year. The selling price and raw material cost for each product is $50 and S15.5 respectively. The machine has a scrap value of $360,000 at the end of the 6th year. Suppose that the maintenance expenses remain no change for the 6 years. However, there is an annual rise of 3% for the worker's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) Prepare a table for the cash flow of the project. а. b. Calculate the NPV of the project cost of capital at 6%. с. Based on…
Question 1) Nascar Company has two alternatives for a new truck investment: Buy or lease. Buying option: The purchasing cost of the truck is 230.000 dollars. The economic life will be five years and at the end fifth year the truck will have a salvage value, 40.000 dollars Repair and insurance costs: 1.year 10.000 dollars 2.year 15.000 3.year 20.000 4.year 25.000 5.year 28.000 Leasing option: Lease period: 5 years Annual lease payments: 60.000 dollars (payments will be made at the beginning of each year) Also, at the beginning of contract period Nascar Co. must pay a deposit, 20.000 dollars. This deposit amount will be refunded at the end of fifth year. According to the leasing contract all repair and insurance expenses are under the responsibility of leasing company. Make your decision according to Net Present Value Method. (Assume the discount rate of the company is 12%) Present value of 1 dollar Period Discount rate (12%) 1 0,893 2 0,797 3…
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Problem 3 A piping contractor is considering the purchase of a number of pipe laying machines for a project that will last for 6 years. Each machine will cost $ 50,000.00 and have no salvage value at the end of the project. In determining whether to make this purchase, straight line deprecation can be used and an annual income tax on profits of of 34%, and an after-tax MARR is 8%. What is the minimum annual net benefit before taxes that must be generated by the each machine in order to justify its purchase? Answer:
eBook Average Rate of Return-Cost Savings Northwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $103,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $32,680 per year. In addition, the equipment will have operating and energy costs of $9,960 per year. Print Item Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. % 3 0 D Coming December 9th 16h Love and Monsters - Watch the tra... Dec 8 MONS 2:27
i 4 ances Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase? Req A Complete this question by entering your answers in the tabs below. Revenues Machine A: Keep or Replace Analysis Req B Compute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be…

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