Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 19, Problem 18E
1.
To determine
Calculate the present value of the after tax
2.
To determine
Calculate the present value of the after tax depreciation, assume that MACRS method is used.
3.
To determine
State the benefits that the company enjoys when using MACRS method of depreciation.
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A certain company is considering the use of a concrete electric pole in the expansion
of its power distribution lines. A concrete pole cost 18,000 each and will last 20 years. The company is presently using wooden poles which cost 12,000 per pole and will last 10 years. Assume annual taxes amount to 1 percent of first cost and zero salvage value in both cases. Money is worth 12 percent.
1.3. Excluding interest on capital, what is the annual cost of the concrete pole?
1.4. Using ROR on additional investment, which pole should be used?
A certain company is considering the use of a concrete electric pole in the expansion
of its power distribution lines. A concrete pole cost 18,000 each and will last 20 years. The company is presently using wooden poles which cost 12,000 per pole and will last 10 years. Assume annual taxes amount to 1 percent of first cost and zero salvage value in both cases. Money is worth 12 percent.
1.1. What is the amount of annual depreciation each pole?
1.2. Excluding interest on capital, what is the annual cost of the wooden pole?
Your firm needs a computerized tool lathe which cost $49000 and requires $119000 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. Assume a tax rate of 34 percent and a discount rate of 13 percent.
Calculate the depreciation tax shield for this project. Work in excel
Chapter 19 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 19 - Explain the difference between independent...Ch. 19 - Explain why the timing and quantity of cash flows...Ch. 19 - Prob. 3DQCh. 19 - Prob. 4DQCh. 19 - What is the accounting rate of return?Ch. 19 - What is the cost of capital? What role does it...Ch. 19 - Prob. 7DQCh. 19 - Explain how the NPV is used to determine whether a...Ch. 19 - Explain why NPV is generally preferred over IRR...Ch. 19 - Prob. 10DQ
Ch. 19 - Prob. 11DQCh. 19 - Prob. 12DQCh. 19 - Prob. 13DQCh. 19 - Prob. 14DQCh. 19 - Prob. 15DQCh. 19 - Jan Booth is considering investing in either a...Ch. 19 - Prob. 2CECh. 19 - Carsen Sorensen, controller of Thayn Company, just...Ch. 19 - Manzer Enterprises is considering two independent...Ch. 19 - Keating Hospital is considering two different...Ch. 19 - Prob. 6CECh. 19 - Prob. 7ECh. 19 - Prob. 8ECh. 19 - Each of the following scenarios is independent....Ch. 19 - Roberts Company is considering an investment in...Ch. 19 - NPV A clinic is considering the possibility of two...Ch. 19 - Refer to Exercise 19.11. 1. Compute the payback...Ch. 19 - Buena Vision Clinic is considering an investment...Ch. 19 - Consider each of the following independent cases....Ch. 19 - Gina Ripley, president of Dearing Company, is...Ch. 19 - Covington Pharmacies has decided to automate its...Ch. 19 - Postman Company is considering two independent...Ch. 19 - Prob. 18ECh. 19 - Prob. 19ECh. 19 - Prob. 20ECh. 19 - Assume there are two competing projects, X and Y....Ch. 19 - Prob. 22ECh. 19 - Assume that an investment of 100,000 produces a...Ch. 19 - Prob. 24PCh. 19 - Prob. 25PCh. 19 - Prob. 26PCh. 19 - Kent Tessman, manager of a Dairy Products...Ch. 19 - Friedman Company is considering installing a new...Ch. 19 - Okmulgee Hospital (a large metropolitan for-profit...Ch. 19 - Mallette Manufacturing, Inc., produces washing...Ch. 19 - Jonfran Company manufactures three different...Ch. 19 - Prob. 32P
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