P10-21 Cost-Cutting Proposals [LO2]Masters Machine Shop is considering four-year project improve its productionefficiency. Buying a new machine press for $844,800 is estimated to result in $281,600in annual pretax cost savings. The press falls in the MACRS five-year class(MACRS Table), and it will have a salvage value at the end of the project of $123,200.The press also requires an initial investment in spare parts inventory of $35,200, alongwith an additional $5,280 in inventory for each succeeding year of the project.If the shop's tax rate is 23 percent and its discount rate is 10 percent, what is the NPV forthis project?Multiple ChoiceOOOOO$46,816.22$49,127.86$-51,728.78$49,157.03$44,475.41

Pretax cost savings are savings that a business realizes on expenditures or costs prior to deducting…

Answered: P10-21 Cost-Cutting Proposals [LO2]…

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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10) (Break-even analysis) The Marvel Mfg. Company is considering whether or not to construct a new robotic production facility. The cost of this new facility is $612,000 and it is expected to have a six-year life with annual depreciation expense of $102,000 and no salvage value. Annual sales from the new facility are expected to be 2,010 units with a price of $1,060 per unit. Variable production costs are $630 per unit, and fixed cash expenses are $76,000 per year. a. Find the accounting and the cash break-even units of production. b. Will the plant make a profit based on its current expected level of operations? c. Will the plant contribute cash flow to the firm at the expected level of operations? Question content area bottom Part 1 a. The accounting break-even units of production is______units.
A3
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $850,000, and it would cost another $23,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $568,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in networking capital (inventory) of $14,500. The sprayer would not change revenues, but it is expected to save the firm $368,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow? $ What are the net operating cash flows in Years 1, 2, and 3? Year 1: $ Year 2: $ Year 3: $ What is…
Project Evaluation Kolby's Korndogs is looking at a new sausage system with an installed cost of $655,000. This cost will be depreciated straightline to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $85,000. The sausage system will save the firm $183,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 22 percent and the discount rate is 8 percent, what is the NPV of this project? Use excel to solve problem. Include formula view in excel.
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8 Netflix is considering building a new production facility in New Jersey. Netflix's financial team has made the following estimates regarding the costs and benefits of the new production facility in 2023: Sales: 918 Variable Costs: 216 EBIT: 414 Tax Rate: 25% Depreciation: 16 Change in NWC: 61 CapEx: 9 Based on the above information what is the 2023 FCF from this project?
New-Project Analysis The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $63,000, and it would cost another $19,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $26,800. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $2,320. The machine would have no effect on revenues, but it is expected to save the firm $19,960 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest…
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13,000 6. The Imperial Chemical Company is considering purchasing a chemical analysis machine worth $13,000. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a reduction of labour costs. In order to operate the machine properly, it must be calibrated each year. The machine has an expected life of 6 years, after which it will have no salvage value. The following table summarizes the annual savings in labour cost and the annual maintenance costs in calibration over 6 years: Year (n) Net Cash Flow ($) 0 Costs ($) Savings ($) -13,000 1 2,300 6,000 3,700 2 2,300 7,000 4,700 3 2,300 9,000 6,700 4 2,300 9,000 6,700 5 2,300 9,000 6,700 6 2,300 9,000 6,700 Find the internal rate of return for this project. [6]

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