Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range(ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset willcost $285,000, and it will produce eamings before depreciation and taxes of $92,000 per year for three years, and then $45,000 ayear for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 13 percent. In doing your analysis, if youhave years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for anapproximate answer but calculate your final answer using the formula and financial calculator methods.a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.)Net present valueb. Based on the net present value, should Universal Electronics purchase the asset?O YesO No Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range(ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset willcost $285,000, and it will produce eamings before depreciation and taxes of $92,000 per year for three years, and then $45,000 ayear for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 13 percent. In doing your analysis, if youhave years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for anapproximate answer but calculate your final answer using the formula and financial calculator methods.a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.)Net present valueb. Based on the net present value, should Universal Electronics purchase the asset?O YesO No

The difference between the current value of cash inflows and outflow of cash over a period of time…

Answered: Universal Electronics is considering…

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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The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Operating Net Cash Year Income Flow 1 $100,000 $180,000 2 40,000 120,000 40,000 100,000 4 10,000 90,000 10,000 120,000 The average rate of return for this investment is Oa. 10% Оb. 18% Ос. 16% С. Od. 58%
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XYZ is evaluating a project that would require the purchase of a piece of equipment for $440,000 today. During year 1, the project is expected to have relevant revenue of $786,000, relevant costs of $201,000, and relevant depreciation of $132,000. XYZ would need to borrow $440,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 21.96% but less than 26.61% A rate less than 21.96% or a rate greater than 46.34% A rate equal to or greater than 31.02% but less than 38.39% A rate equal to or greater than 38.39% but less than 46.34% A rate equal to or greater than 26.61% but less than 31.02%
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The initial investment in machinery would be $8 million immediately and the project is expected to last for three years. Investment in machinery receives tax allowable depreciation of 25% per annum on a straight-line basis. Allowances are receivable one year in arrears. The machinery will be sold at the end of the project for $5 million, in year 3 prices. And the answer is in the picture. How to calculate the answer of Tax Allowable depreciation?
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