Project 2 Harris Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. The firm pays 40 percent taxes on ordinary income and capital gains. Project 2 Questions: 1) Calculate the book value of the existing asset being replaced. 2) Calculate the tax effect from the sale of the existing asset. 3) Calculate the initial investment required for the new asset. 4) Calculate the incremental earnings before depreciation and taxes for 5 years. 5) Calculate the incremental depreciation for six years. 6) Summarize the incremental after-tax cash flow (relevant cash flows) for years t = 0 through t = 6. 7) With the given information, compute the payback period. 8) ) With the given information in and 15 percent cost of capital, (a) Compute the net present value. (b) Should the project be accepted?
Project 2
Harris Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given.
The firm pays 40 percent taxes on ordinary income and
Project 2 Questions:
1) Calculate the book value of the existing asset being replaced.
2) Calculate the tax effect from the sale of the existing asset.
3) Calculate the initial investment required for the new asset.
4) Calculate the incremental earnings before
5) Calculate the incremental depreciation for six years.
6) Summarize the incremental after-tax cash flow (relevant cash flows) for years t = 0 through t = 6.
7) With the given information, compute the payback period.
8) ) With the given information in and 15 percent cost of capital,
(a) Compute the
(b) Should the project be accepted?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
