ENGINEERING ECONOMIC ENHANCED EBOOK
ENGINEERING ECONOMIC ENHANCED EBOOK
14th Edition
ISBN: 9780190931940
Author: NEWNAN
Publisher: OXF
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Chapter 13, Problem 47P
To determine

To find:Before tax rate of return on the proposal of installing a new machine.

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Lombard Company is contemplating the purchase of a new​ high-speed widget grinder to replace the existing grinder. The existing grinder was purchased 2 years ago at an installed cost of $57,400​; it was being depreciated under MACRS using a​ 5-year recovery period. The existing grinder is expected to have a usable life of 5 more years. The new grinder costs $103,300 and requires $5,200 in installation​ costs; it has a​ 5-year usable life and would be depreciated under MACRS using a​ 5-year recovery period. Lombard can currently sell the existing grinder for $69,900 without incurring any removal or cleanup costs. To support the increased business resulting from purchase of the new​ grinder, accounts receivable would increase by $40,800​, inventories by $29,900​, and accounts payable by $57,900. At the end of 5​ years, the existing grinder would have a market value of​ zero; the new grinder would be sold to net $28,600after removal and cleanup costs and before taxes. The firm is subject…
3. damp truck bought for P900,000 six years ago. It will have a salvage value of P100,000 two years from now. What is the book value at the end of 6th year. Use Straight-line Method 4. company owns earth moving equipment that cost P100,000. After 8 years it will have estimated Parvage value of P20,000. Compute the annual depreciation cost and the book value at the end of 5 years (a) using SLD (b) Using sinking fund
An automaker is buying some special tools for $100,000. The tools are being depreciated by double declining balance depreciation using a 4-year depreciable life and a $6250 salvage value. It is expected the tools will actually be kept in service for 6 years and then sold for $6250. The before-tax benefit of owning the tools is as follows: Year Before-Tax Cash Flow 1 $30,000 2 $30,000 3 $35,000 4 $40,000 5 $10,000 6 $10,000 6,250 Selling price Compute the after-tax rate of return for this investment situation, assuming a 30% incremental tax rate.
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