You firm just bought a new machine. The machine cost $1,800,000. The machine will be operated for 4 years. It will then be sold for its salvage value of $100,000. The CCA rate is 22%. The tax rate is 34%. The required rate of return is 9% compounded annually. The asset class will remain open. What is the present value of the CCA tax shield? Assume the half-year rule is in effect. Your answer should be accurate to two decimal places. Your Answer:

You firm just bought a new machine. The machine cost $1,800,000. The machine will be operated for 4 years. It will then be sold for its salvage value of $100,000. The CCA rate is 22%. The tax rate is 34%. The required rate of return is 9% compounded annually. The asset class will remain open. What is the present value of the CCA tax shield? Assume the half-year rule is in effect. Your answer should be accurate to two decimal places. Your Answer:

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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Am. 140.
Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of$670,000at the end of the project's and assets ten year life. Ace's marginal tax rate is32%. The firm will have to pay$8,047,675to buy the asset. You have estimated that they could sell the asset for$787,309to a Brazilian firm at the end of the project. Answer in dollars and cents.
A corporation is considering purchasing a machine that will save $150,000 per year before taxes. The cost of operating the machine (including maintenance) is $30,000 per year. The machine will be needed for five years, after which it will have a zero salvage value. MACRS depreciation will be used, assuming a three-year class life. The marginal income tax rate is 25%. If the firm wants 15% return on investment after taxes, how much can it afford to pay for this machine? If the firm wants 15% return on investment after taxes, it can afford to pay ?.
What is the NPV assuming a 12% rate of return. (ignore Tax) Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Depreciation is $10, 230 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value of $4,600. Calculate NPV assuming a 12% rate of return Bramble Inc. is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has been collected on this investment: Cost Old Equipment Accumulated depreciation Remaining life Current salvage value Salvage value in 8 years Annual cash operating costs $81,840 Cost $41,000 8 years $11,200 $0 $35,700 New Equipment Estimated useful life Salvage value in 8 years Annual cash operating costs $38,000 8 years $4,600 $30,700 Depreciation is $10,230 per…
You purchased a machine for $1.19 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 22%. If you sell the machine today (after three years of depreciation) for $701,000, what is your incremental cash flow from selling the machine? Your total incremental cash flow will be $ (Round to the nearest cent.)
A new machine costing $150,000 is expected to save the McKaig Brick Company $11,000 per year for 5 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 5-year period to an estimated salvage value of $0. The firm’s marginal tax rate is 40 percent. What are the annual net cash flows associated with the purchase of this machine? Round your answer to the nearest dollar. $ Compute the net investment (NINV) for this project. Round your answer to the nearest dollar. $
what is the present value of the tax shield for the following project? the initial investment is $300,000. the project will last for 6 years, at which time the asset will be sold for $90,000. the asset will be depreciated on a declining balance basis at a rate of 20 percent. the firm's marginal tax rate is 40 percent. the firm's required rate of return is 8 percent a) 16,204.36 b) 82,539.68 c) 98,744.04 d) 66,335.32
Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent.Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.)
You purchased a machine for $1.13 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40%. If you sell the machine today (after three years of depreciation) for $710,000, what is your incremental cash flow from selling the machine?
Your facility is undergoing a major expansion, which will require significant capitalinvestment into new machinery. The total cost of the machinery will be $7.2 Million, and theywill be purchased outright immediately. This machinery is considered a 7-year MACRSasset. However, you expect to use it for only six years before selling it for $1.5 Million. What is the gains tax owed on the machinery sale at the end of year 6 if the tax rate is 21%? a. $45,108b. $169,692c. $315,000d. $0
Your firm is considering investing in a new capital project that requires an initial investment of $8,000,000. This equipment will be depreciated by the straight-line over four years down to a value of zero. The machinery also has an operation life of four years. At the end of that life, you estimate it will have a salvage value of $120,000. Any gain or loss on the resell will be taxed at the firm's marginal tax rate. During the four-year life, the project should generate annual cash flows of $225,000 per year. The firm has a marginal tax rate of 22%, and it requires a return of 8.50% on projects of such risk. What is the Net Present Value of this project?
A corporation is considering purchasing a machine that will save $150,000 per year before taxes. The cost of operating the machine (including maintenance) is $30,000 per year. The machine will be needed for five years, after which it will have a zero salvage value. MACRS depreciation will be used, assuming a three-year class life. The marginal income tax rate is 25%. If the firm wants 15% return on investment after taxes, how much can it afford to pay for this machine? Click the icon to view the MACRS depreciation schedules Click the icon to view the interest factors for discrete compounding when /- 15% per year. If the firm wants 15% return on investment after taxes, it can afford to pay thousand for this machine. (Round to one decimal place.)

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