The cost of the new machine is $127,000.Installation will cost $20,000.$4,000 in net working capital will be needed at the time of installation.The project will increase revenues by $85,000 per year, but operating costs will increase by 35% of the revenue increase.Simplified straight line depreciation is used.Class life is 5 years, and the firm is planning to keep the project for 5 years.Salvage value at the end of year 5 will be $50,000.14% cost of capital; 34% marginal tax rate. /////// The depreciation is 29400. How do I get this result? Could you please show me how to get depreciation by NOT using excel but calculation?

Part 2: ExplanationStep 1: Calculate the Initial InvestmentThe initial investment includes the cost…

Answered: The cost of the new machine is…

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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Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $73,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $3,700 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 11 percent. (MACRS schedule) Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Should the company buy and install the machine press? No Yes
Please show all your work
A firm can purchase a centrifugal separator (5-year MACRS property) for $22,000. The estimated salvage value is $4,000 after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be $2,200. These O&M costs are projected to increase by $1,000 per year each year thereafter. The income tax rate is 24% and the MARR is 11% after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis? CAN YOU DO THIS PROBLEM BY HAND? AND NOT USING EXCEL I WOULD REALLY APPRECIATE IT!!!!
Mars Inc. is considering a 5-year project that requires a new machine that costs $65,000, and an additional net working capital of $4,000, which will be recovered when the project ends in 5 years. This project would increase the firm's revenues by $21,000 per year and its operating costs by $9,000 per year. Mars will use the 3-year MACRS to depreciate the machine, and it expects to sell the machine at the end of the project for $19,000. The firm's marginal tax rate is 28 percent, and the project's cost of capital is 14 percent. What is the net cash flow at year 5, the final year? MACRS 3-year schedule is as follows: 33%, 45%, 15%, and 7% for years 1 to 4, respectively. Question 14 options: $24,760 $25,460 $25,840 $26,320 $26,680 $27,140
We assume that the company that you selected is considering a new project. The project has 8 years’ life. This project requires an initial investment of $580 million to purchase equipment, and $30 million for shipping & installation fees. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 2,660,000 and the expected annual growth rate is 10.5%. The sales price is $280 per unit and the variable cost is $225 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 3.0%. The required net operating working capital (NOWC) is 11.8% of sales with the corporate tax rate of 21%. The project is assumed to have the same risk as the corporation, so 5.35% is the discount rate for this hypothetical project. Estimate annual cash flows for the 8…
We assume that the company that you selected is considering a new project. The project has 8 years' life. This project requires an initial investment of $580 million to purchase equipment, and $30 million for shipping & installation fees. The fixed assets fall in the 7-year MACRS class. The salvage value of the fixed assets is 10% of the purchase price (including the shipping & installation fee). The number of units of the new product expected to be sold in the first year is 2,660,000 and the expected annual growth rate is 10.5%. The sales price is $280 per unit and the variable cost is $225 per unit in the first year, but they should be adjusted accordingly based on the estimated annualized inflation rate of 3.0%. The required net operating working capital (NOWC) is 11.8% of sales with the corporate tax rate of 21%. The project is assumed to have the same risk as the corporation, so 5.35% is the discount rate for this hypothetical project. Estimate annual cash flows for the 8 years.…
Two techniques can be used to produce expansion anchors. Technique A costs $90,000 initially and will have a $12,000 salvage value after 3 years. The operating cost with this method will be $33,000 in year 1, increasing by $2600 each year. Technique B will have a first cost of $113,000, an operating cost of $7000 in year 1, increasing by $7000 each year,and a $43,000 salvage value after its 3-year life. At an interest rate of 13% per year, which technique should be used on the basis of a present worth analysis? Notice that there are no revenues. Please work out and do not use excel, however if you use excel please show how to input everything needed down to the formula, thank you!
Joanette, Inc., is considering the purchase of a machine that would cost $420,000 and would last for 5 years, at the end of which, the machine would have a salvage value of $42,000. The machine would reduce labor and other costs by $102,000 per year. Additional working capital of $4,000 would be needed immediately, all of which would be recovered at the end of 5 years. The company requires a minimum pretax return of 17% on all investment projects. (ignore income taxes.) Click here to view Exhibit 128-1 and Exhibit 128-2 to determine the appropriate discount factor(s) using the tables provided. Required: Determine the net present value of the project. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar amount.) Net present value
A new machine can be purchased for $50,000. Its expected useful life is seven years, with a salvage value of $5,000. Annual revenues will be $22,000 per year and annual expenses will be 8,000 per year, over the seven-year study period. If the MARR is 10%, determine whether the offer should e accepted. O a. Acceptable and its AW = $4257 O b. Not acceptable and its AW = $2,345 O. Acceptable, and its AW = $5067 O d. Not acceptable and its AW = -$3,281
An investment of $20,000 for a new condenser is being considered. Estimated salvage value of the condenser is $5,000 at the end of an estimated life of 6 years. Annual income each year for the 6 years is $8,500. Annual operating expenses are $2,300. Assume money is worth 15% compounded annually. Determine the external rate of return and whether or not the condenser should be purchased.
Riverview Company is evaluating the proposed acquisition of a new production machine. The machine's base price is $200,000, and installation costs would amount to $28,000. Also, $10,000 in net working capital would be required at installation. The machine will be depreciated for 3 years using simplified straight line depreciation. The machine would save the firm $110,000 per year in operating costs. The firm is planning to keep the machine in place for 5 years. At the end of the fifth year, the machine will be sold for $20,000. Riverview has a cost of capital of 12% and a marginal tax rate of 34%. What is the IRR of the project? 14.1% O 31.3% 9.5% O 28.2% O 19.7%
Miami Machine Shops, Ltd. is consideringpurchasing a vertical drill machine. The machinewill cost $62,000 and will have an eight-year servicelife. The selling price of the machine at the end ofeight years is expected to be $5,000 in today’s dollars. The machine will generate annual revenues of$22,000 (today’s dollars), but the company expectsto have an annual expense (excluding depreciation)of $9,500 (today’s dollars). The asset is classified asa seven-year MACRS property. The project requiresa working-capital investment of $10,000 at year 0.The marginal income tax rate for the firm is averaging 35%. The firm’s market interest rate is 18%.(a) Determine the internal rate of return of thisinvestment.(b) Assume that the firm expects a general inflationrate of 5%, but that it also expects an 8% annualincrease in revenue and working capital and a6% annual increase in expense caused by inflation. Compute the real (inflation-free) internalrate of return. Is this project acceptable?

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