the fourth and final year of a project, Glenny expects operating cash flow after taxes of P440,000. The project required an P60,000 investment in working capital at the beginning. Of that amount, P40,000 will be recovered in year 4 and P20,000 will be i
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In the fourth and final year of a project, Glenny expects operating cash flow after taxes of P440,000. The project required an P60,000 investment in working capital at the beginning. Of that amount, P40,000 will be recovered in year 4 and P20,000 will be in year 5. Machinery associated with the project will be sold for exactly its undepreciated value of P15,000. Tax rate is 40%. Total
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- An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the sixth year of life by each of these methods: a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.I need help with this problem and the answer is not 37.40, 26.93, and 86.2.Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $395,000 is estimated to result in $151,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $51,000. The press also requires an initial investment in spare parts inventory of $22,000, along with an additional $3,200 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. 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? O Yes O No
- The division director for Sandhill Corporation's Mississippi division, which operates as an investment center, is considering investing in machinery which costs of $2230000 and is expected to generate $353000 in additional operating income. If the division's weighted average cost of capital is 11% and its tax rate is 20%, what is the equipment's EVA? O $37100 $353000 $107700 $2453001.) TEI incorporated is considering the use of concrete electric pole in the expansion of its power distribution lines. A concrete pole costs P18,000 each and will last for 15 years. The company is presently using creosoted wooden poles which cost P12,000 per pole and will last 10 years. Assume annual taxes amount to 2% of the first cost and zero salvage value in both cases. .Evaluate the two options and recommend which one is to be chosen using the methods indicated . Money is worth 12% Using the Annual Cost Method. Annual Cost of Wooden Poles = __________________ , Annual Cost of Concrete Poles = _________________ Recommendation: _____________________________________Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operating expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end of the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the respective PWs at EOY O using an MARR of 12%. Cash Flow for Income Taxes ($) Before-Tax Cash Flow ΕΟΥ Depreciation ($) Taxable Income ($) After-Tax Cash Flow ($) ($) [1] 1 [2] 2 [3] [4] 4 [5] [6] [7] 9 [8] 10 [10] PW(0) using MARR [9] [11] Based on Before-Tax Analysis, is this machinery worth investing in? ("YES"/"NO"} [12] Based on After-Tax Analysis, is this machinery worth investing in? ["YES"/NO")
- XYZ Products Company is considering a new product that will sell for P100 and has a variable cost of P60. Expected volume is 20,000 units. New equipment costing P1,500,000 and having a five-year useful life and no salvage value is needed, and will be depreciated using the straight-line method. The machine has fixed cash operating costs of P200,000 per year. The firm is in the 40 percent tax bracket and has cost of capital of 12 percent. The present value of 1, end of five periods is 0.56743; present value of annuity of 1 for 5 periods is 3.60478. How many units per year the firm must sell for the investment to earn 12 percent internal rate of return?Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operating expenses by $50,000 per year for 10 years and to have a $40,000 MV at the end of the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate of 7.5%. State income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the respective PWs at EOY O using an MARR of 12%. Before-Tax Cash Flow {xx.xx} ($) Cash Flow for Income Taxes After-Tax Cash Flow {xx.xx} {xx.xx} ($) ΕΟΥ Depreciation {xx.xx} ($) Taxable Income (xx.xx} ($) ($) 10 1 [ Select ] ( Select) 3 14 5 | Select) 16 | Select ) 18 10 1 Select PW(0) using MARRThe Smith and Jones Research and Development firm has bought a new laboratory equipment (MACRS-GDS 3-year property class) to be used in a research project that will last 3 years. The cost of equipment is $750,000 but require bringing a technician to install the equipment and train the personal with an additional cost of $75,000. The equipment’s supplier will buy back the equipment at the end of the project for $50,000. The O&M costs per year incurred by the equipment are $70,000. The firm signed a contract with the DOD that states that they will receive a one lump-sum of $Y at the end of the life of the research project that will generate a rate of return of 8%. The firm will finance the equipment with a loan at 6% interest rate per year, and considering that the firm will not generate any revenue until the end of year 3, the bank has agreed that principal and accrued interests will be paid at the end of year three. Perform an ATCF analysis to determine the value of Y$ that will…
- 1. Chandler Corporation is planning to invest P420,000 in a new machine which it will depreciate on a straight-line basis over 10 years with zero salvage value. The new machine is expected to generate cash flows from operations, net of income taxes, of P50,000 per year in each of the first six years and P60,000 per year in each of the last four years of its life. What is the payback period? 2. Joey Corporation is considering the purchase of a new machine costing P450,000. The machine will have an economic life of 5 years with no salvage value at the end of its useful life. It will be depreciated using the straight-line method and is expected to produce annual cash flows from operations of P150,000. Joey’s cost of capital is 10%. What is the present value of this capital investment project? Use the Excel formula to compute NPV, rounding off to the nearest whole number.You are considering the purchase of a new high-efficiency machine to replace older machines now. The new machine can replace four of the older machines, each with a current market value of $600. The new machine will cost $5000 and will save the equivalent of 10,000 kWh of electricity per year. After a period of 10 years, neither option (new or old) will have any market value. If you use a before-tax MARR of 25% and pay $0.075 per kilowatt-hour, would you replace the old machines today with the new one?A professor of engineering economics owns an older car. In the past 12 months, he has paid $2000 to replace the transmission, bought two new tires for $160, and installed a music system for $110. He wants to keep the car for 2 more years because he invested money 3 years ago in a 5-year certificate of deposit, which is earmarked to pay for his dream machine, a red European sports car. Today the old car’s engine failed.A hospital in NYC area bought a diagnostic machine at a cost of $40,000. Maintenance cost is expected to remain constant throughout the life of this machine at $2,000 per year. The salvage value is estimated to be “0” at the end of the useful life of 10 years. Determine the economic life of this machine. MARR = 10% A. 5 years B. 1 year C. 10 years D. 7 years
