Question 52 ptsA $73,000 machine with a 8-year class life was purchased 6 years ago. Themachine will now be sold for $22,000 and replaced with a new machinecosting $54,000, with a 5-year class life. The new machine will not increasesales, but will decrease operating costs by $16,000 per year. Simplifiedstraight line depreciation is employed for both machines, and the marginalcorporate tax rate is 34 percent. What is the initial outlay for the project?NOTE-- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASEENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IFYOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THEDOLLAR SIGN.

Solution 1. Calculate the book value of the old machine: Book value = Cost - Accumulated…

Answered: Question 5 2 pts A $73,000 machine with…

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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QUESTION 10 Georgia Mills Company (GMC) purchase a milling machine, which it intends to use for the next five years, for $180,000. This machine is expected to save GMC $35,000 during the first operating year. Then, the annual savings are expected to decrease by 3% each subsequent year over the previous year due to increased maintenance costs. Assuming that GMC would operate the machine for an average of 5,000 hours per year and that the machine would have no appreciable salvage value at the end of the five year period, determine the equivalent dollar savings per operating hour at 15% interest compounded annually. OA $3.24 lost per hour OB. $4.09 lost per hour OC $6.74 lost per hour D.$5.92 lost per hour
QUESTION 8 The MLA investments purchased a machine a few years ago. The original cost of the machine was $140000. The machine is depreciated to an assumed salvage value of zero using MACRS five-year class schedule. However, after using the machine for four years, the company decided to sell it for a price of $55000. If the company's marginal tax rate is 21 percent, what is the after-tax cash flow associated with this transaction? The depreciation rates from year 1 to 6 are 20% ,32%, 19.2%, 11.52%, 11.52%, and 5.76 percent, respectively.
A6
Question 17 A $65,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $78,000, with a 10-year class life. The new machine will non increase sales, but will decrease operating costs by $13,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
Question 13 Mack Company has a machine with a book value of $80,000 and a remaining four-year useful life. A new machine is available at a cost of $110,000, and Mack can also receive $50,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $15,000 per year over its four-year useful life. Show the computations as to whether the machine should be replaced or kept.
14
QUESTION 2 a) A financial analyst for a manufacturer of BMV spare part is considering using its new engine. The production of the engine can be used over the 4 years, with zero salvage value at the end of year 4. The project's initial investment is RM60,000 which depreciates under straight-line method and its discount rate is 10 percent. The firm's corporate tax rate is 40 percent. LITT Optimistic 800 Items Expected 500 Unit sales (unit) Price/unit (RM) Variable cost/unit (RM) Fixed costs/annum (RM) 75 50 2000 Pessimistic 200 65 60 3000 100 30 1000 Given the above information on the results of launching the new engine, you are required to compute: i) The worst case financial break-even point.
QUESTION 2 Warren Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $59300. The equipment will have an initial cost of $106000 and have an 8 year life and no salvage value of the equipment. What is the payback period? Round your answer 2 decimals
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- ↑
Question 7 Elmdale Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 3-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000. What is the effect on net income over the 3 years if Elmdale Company chooses to replace the equipment? Should Elmdale replace the equipment? lyjı H 4 pts 99+
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