Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existingmachine was purchased 2 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table forthe applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,000 andrequires $5,300 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $24,800without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of anew grading machine.The initial cash flow will be $(Round to the nearest dollar.)

There large amount of investment is required in the large projects and based on that projects gives…

nitial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace th nachine was purchased 2 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year rec he applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The n equires $5,300 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine o vithout incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated w ew grading machine.

nitial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace th nachine was purchased 2 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year rec he applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The n equires $5,300 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine o vithout incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated w ew grading machine.

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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Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's payback period. Choose Numerator: Payback Period 7 Choose Denominator: = Payback Period Payback period =
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 36,500 Annual cash inflows $ 8,600 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The internal rate of return of the investment is closest to: Multiple Choice 24 % 22 % 20% 26%
Emma Company is considering buying a machine for $206,000 with an estimated life of 15 years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $20,500 each year. The cash payback on this investment is Round your answer 2 decimal places Selected Answer: 6,766.67 Correct Answer: 6.02 ± 0.05
Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $19,400; it was being depreciated under MACRS using a 5-year recovery period. (See table for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,600 and requires $4,900 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $25,500 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine. The initial cash flow will be $. (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation…
Stenback, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: Initial capital investment Estimated useful life Estimated residual value Estimated annual net cash inflow for 10 years Required rate of return Compute the payback period for each investment. Show your calculations and round to one decimal place. $ Investment A Investment B 280,000 $ 210,000 7 years 13 years 12,000 25,000 45,000 85,000 14% 11% Investment A Investment B Select the formula, then enter the amounts to calculate the payback period for each investment. + = Payback (in years) = =
Rihanna Company is considering purchasing new equipment for $440,000. It is expected that the equipment will produce net annual cash flows of $55,000 over its 10-year useful life. Annual depreciation will be $44,000. Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.) Cash payback period years
The information below relates to the purchase of equipment: investment in the project: $10,000 Net annual cash inflows: 2,400 Working capital required: 5,000 Salvage value of the equipment: 1,000 Life of the project: 8 years At the completion of the project, the working capital will be released for use elsewhere. Compute the net present value of the project, using a discount rate of 10% $606 $8,271 ($1,729) $1,729
The following data relates to an investment proposal: Investment in equipment Net annual cash inflow $32,000 5,000 expected Working capital required Salvage value of equipment Life of the project 8,000 2,000 10 years Working capital will be recovered at the end of the project's life. Using an 6% discount rate, the net present value of the project is closest to: $10,380 ($2,084) None of the other answers are correct $5,916 $2,380
Required information. [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. FV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation). Depreciation Machinery Selling, general, and administrative expenses Income Years 1-5 4. Determine Project Y's net present value using 9% as the discount rate. Note: Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar. Net present value Not Cash Flows Project Y $ 400,000 Present Value of Annuity at 9% 179,200 66,300 29,000 $ 125,500 Present Value of Net Cash Flows
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327
Terminal cash flow: Replacement decision Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer, more sophisticated machine. The new machine will cost $207,000 and will require $29,200 in installation costs. It will be depreciated under MACRS using a 5-year recovery period (see the table for the applicable depreciation percentages). A $26,000 increase in net working capital will be required to support the new machine. The firm's managers plan to evaluate the potential replacement over a 4-year period. They estimate that the old machine could be sold at the end of 4 years to net $14,000 before taxes; the new machine at the end of 4 years will be worth $73,000 before taxes. Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The firm is subject to a 21% tax rate. The terminal cash flow for the replacement decision is shown below: (Round to the nearest…
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