**Text Transcription for Educational Website:****Use the following to answer the next three questions:**The Wall, Co. is considering the purchase of some new machinery. The new machinery costs $100,000. The machinery falls into the MACRS three-year class, and it will be sold after three years for $8,000. The depreciation percentages each year are: Year 1 = 33%, Year 2 = 45%, Year 3 = 15%, Year 4 = 7%.The machinery will require The Wall to increase its working capital by $4,300, which will be recovered at the end of the machinery's life. The machinery has a three-year life and will increase The Wall's revenues by $150,000 and costs by $25,000 for each year of the project's three-year life. The Wall has a 10% cost of capital and has a 20% tax rate.**Question:**What is the operating cash flow in year 2 for the project? The image presents a list of options, each with a circle beside it, indicating they may be part of a selection or multiple-choice format. The options listed are amounts in dollars:1. $100,0002. $109,0003. $100,0004. $106,600Each dollar amount is preceded by an empty circle, suggesting the possibility of selecting one option. There are no graphs or diagrams to explain further.

Operating Cash flow is the amount which is earned by the investor from the project. It is the net…

Answered: Use the following to answer the next…

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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York Steel buys a new press brake for $800,000. It is expected to last twenty years and have a salvage value of $100,000. Using the declining balance method, what rate of depreciation will produce a book value after 20 years that will equal the salvage value?
Alfredo Company purchased a new 3-D printer for $863,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $17,000. Calculate depreciation using the straight-line method.
Special Instrument company is considering replacing its machine with a new model that sells for $40,000, the cost of installation is $6,000. The old machine has been fully depreciated and has a $2500 salvage value. The new machine will be depreciated as a 3-year MACRS asset. Revenues are expected to increase $18,000 per year over the 5-year life of the new machine. At the end of 5 years the new machine is expected to have a $1500 salvage value. What is the NPV for this project if Special Instrument has a required rate of return of 12% and a marginal tax rate of 35%? Operating costs are not expected to increase from the current level of $8,000 per year. Briefly Discuss if you accept or reject the new machine and why.
A commercial company plans to buy the device for $ 20,000 and is expected to sell it for $ 8,000 in the future.The useful life of the device is estimated at 8 years. It is desirable to calculate the depreciation of first year using Straight line depreciation.
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Crane Inc. wants to purchase a new machine for $40,700, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,300, and Crane Inc. expects to sell it for that amount. The new machine will decrease operating costs by $9,700 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) years The investment Assuming the company has a required rate of return of 10%, determine whether the new machine should…
Tech Engineering Company is considering the purchase of a new machine. The new machine, which falls into the MACRS 5-year class, has an estimated life of 5 years, and it costs $40,000 to purchase the machine. Tech plans to sell the machine at the end of the fifth year for $12,000. Initial decrease in accounts payable = $3,000, which must be restored at the end of the project's life. The applicable depreciation rates are 0.20, 0.32, 0.19, 0.12, 0.11, and 0.06. The new machine is expected to generate before-tax cash savings of $13,000 per year. The company's tax rate is 30%. What is the year 5 total free cash flow of the proposed project? Group of answer choices $24,540 $32,540 $22,540 $27,540 $29,540
You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained the property from a borrower who defaulted on his loan. First Capital is offering the property for $200,000. If you buy the property, you believe that you will have to spend (1) $10,500 on various acquisition related expenses and (2) an average of $2,000 per month during the next 12 months for repair costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is willing to provide $180,000 in financing at 4.25 percent interest for 12 months payable monthly (interest only). Your market research indicates that after you repair the property, it may sell for about $225,000 at the end of one year. Furthermore, you will probably have to pay about $3,000 in fees and selling expenses in order to sell the property at that time. If you wanted to earn a 20 percent return compounded monthly, do you believe that this would be a…
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To meet increased delivery demands, the Moo-Cow Dairy has just purchased 10 new delivery trucks. Each truck cost $18,000 and has an expected life of 4 years. The trucks can be sold for $2000 each after 4 years. Using MACRS: (a) Determine the depreciation schedule for each truck. (b) Determine the book value at the end of each year
A group of companies decided to acquire a state-of-the-art production machine that will cost P2,500,000. It will also aquire another P50,000 for shipping and P65,000 for installation. Using standard Declining Balance Method 8% annual rate, find: a. The depreciation cost for its 3rd year of use. b. The accumulated depreciation after 6 years. c. The salvage value if it is expected to last for 15 years.
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