Problem 9-6 Calculating Salvage Value [LO 2] Consider an asset that costs $690,000 and is depreciated straight-line to zero over its 9- year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $171,000. If the relevant tax rate is 21 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value

Problem 9-6 Calculating Salvage Value [LO 2] Consider an asset that costs $690,000 and is depreciated straight-line to zero over its 9- year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $171,000. If the relevant tax rate is 21 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 11.041 Replacement Value With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 13% per year. Determine the replacement value. Market Value, $ Annual Cost, $ per Year Salvage Value Life, Years The replacement value is $ Machine X ? -61.000 13,500 3 Machine Y 94,000 -40,000 for year Lincreasing by 2000 per year thereafter. 17,000 5
Problem 6-10 Calculating Salvage Value An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $8,900,000 and will be sold for $2,440,000 at the end of the project. If the tax rate is 23 percent, what is the aftertax salvage value of the asset? (MACRS schedule) (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value $ 2,232,149
2 10 points & 01:46:23 eBook Hint Bartlett Car Wash Company is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $91,438 per year. Other information about this proposed project follows: Initial investment Useful life Salvage value $ 427,280 8 years $ 52,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett. Note: Round your percentage answer to 2 decimal places. 2. Calculate the payback period for Bartlett. Note: Round your answer to 2 decimal places. 1. Accounting Rate of Return Print 2. Payback Period References % years
QUESTION 30 Twin Buttes Mine Co. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,500 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. Each project has a WACC of 11%. What is the equivalent annual annuity of the most profitable project? a. $1,345.50 O b. $1,346.30 O c. $1,361.52 O d. $1,376.74 O e. $1,411.15
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Problem 7-2 Scenario Analysis We are evaluating a project that costs $520,000, has a life of 6 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 73,000 units per year. Price per unit is $45, variable cost per unit is $30, and fixed costs are $840,000 per year. The tax rate is 21 percent, and we require a return of 15 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case NPV Worst-case NPV
10 1 points Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.484 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $193,200. The project requires an initial investment in net working capital of $276,000. The project is estimated to generate $2,208,000 in annual sales, with costs of $883,200. The tax rate is 33 percent and the required return on the project is 11 percent. Required: (a)What is the project's year 0 net cash flow? -2,760,000 V (b)What is the project's year 1 net cash flow? 1,044,770 (c) What is the project's year 2 net cash flow? 1,276,942 (d)What is the project's year 3 net cash flow? 1,566,300 (e)What is the NPV? 1,100,871 View previc
es Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $220,000, and it will produce earnings before depreciation and taxes of $72,000 per year for three years, and then $35,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 14 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Net present value b. Based on the…
6. Problem 12.11 (Replacement Analysis) eBook St. 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 of purchase. 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- ↑
Problem 10-9 Calculating Project OCF [LO1] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,654,000 in annual sales, with costs of $631,000. If the tax rate is 24 percent, what is the OCF for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) OCF $ 917,897
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