Please Solve This Question Question:54The following data is associated with a proposed replacement project:A machine that originally cost $25,000 and was depreciated on astraight line basis has one year of its expected 5-year life remaining. Itscurrent market value is $12,000. The corporate tax rate is 34%. The cashflow from disposing of the old machine is:A. $12,000.B. $9,620.C. ($9,620)D. $14,380

Step 1: Define DepreciationDepreciation means diminution, which applies to fixed assets as their…

Answered: Question:54 The following data is…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Net present value-unequal lives Bunker Hill Mining Company has two competing proposals: a processing mill and an electric shovel. Both pieces of equipment have an initial investment of 750,000. The net cash flows estimated for the two proposals are as follows: The estimated residual value of the processing mill at the end of Year 4 is 280,000. Determine which equipment should be favored, comparing the net present values of the two proposals and assuming a minimum rate of return of 15%. Use the present value table appearing in Exhibit 2 of this chapter.
Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?
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A company has purchased a machine (CCA rate 27 %) at $232,000 and has a tax rate of 38.00%. By how much will the NPV change if the company is able to obtain a $15,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 10.10% and that all else remains the same. a. $13,031 b. $10,208 c. - $2,823 d. $7,385 e. $10,852
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Consider the following information: Initial cost of equipment $108,000 Sales tax and delivery costs $7,000 Estimated life 7 years Salvage value $11,000 Annual cash inflows $31,000 Estimated cost of capital 10% Without considering the effect of income taxes, the net present value of the equipment is: O $48,566. $41,566. $39,921. $42,921.
Given the following information and assuming straight-line depreciation to zero, what is the IRR of this project? Initial investment = $400,000; life = four years; cost savings = $125,000 per year; salvage value = $20,000 in year 5; tax rate = 34%; discount rate = 12%.Multiple Choice7.51%9.43%10.24%6.25%8.15%
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 accounting rate of return. Choose Numerator: Accounting Rate of Return I Choose Denominator: = Accounting Rate of Return Accounting rate of return
Consider the financial data for a project given in the table below. Initial investment Project life Salvage value Annual revenue $70,000 6 years $10,000 $26,000 Annual expenses $7,000 (a) What is i for this project? 18.1 % (Round to one decimal place.) (b) If the annual expense increases at a 7% rate over the previous year's expenses, but the annual income is unchanged, what is the new / - 16 % (Round to one decimal place.) (c) In part (b), at what annual rate will the annual income have to increase to maintain the same i obtained in part (a)? The annual income has to increase at% per year (Round to one decimal place.)
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 =
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