Homework Answers
| Book value of old machine=700000-(70000*5) | 350000 | |||||||||||||
| Current Salvage Value | 200000 | |||||||||||||
| Loss on Salvage=(350000-200000) | 150000 | |||||||||||||
| Tax Saving on Loss=150000*25%= | 37500 | |||||||||||||
| Salvage Cash Flow from old machine | 237500 | (200000+37500) | ||||||||||||
| CASH FLOWS IF The MACHINE IS REPLACED NOW | ||||||||||||||
| N | Year | 0 | 1 | 2 | 3 | 4 | 5 | |||||||
| a | Initial Cash Flow for new machine | (1,000,000) | ||||||||||||
| b | Salvage Cash Flow of Old machine | 237,500 | ||||||||||||
| c=a+b | Net Initial Cash Flow | (762,500) | ||||||||||||
| d | Before tax incremental revenue | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | ||||||||
| e=d*(1-0.25) | After tax incremental revenue | 187,500 | 187,500 | 187,500 | 187,500 | 187,500 | ||||||||
| f | Annual Depreciation of New Machine(1000000-100000)/5 | 180,000 | 180,000 | 180,000 | 180,000 | 180,000 | ||||||||
| g | Annual Depreciation of Old Machine(700000/10) | 70,000 | 70,000 | 70,000 | 70,000 | 70,000 | ||||||||
| i=f-g | Incremental depreciation | 110,000 | 110,000 | 110,000 | 110,000 | 110,000 | ||||||||
| j=i*25% | Incremental depreciation tax shield | 27,500 | 27,500 | 27,500 | 27,500 | 27,500 | ||||||||
| k=e+j | Annual incremental cash inflow | 215,000 | 215,000 | 215,000 | 215,000 | 215,000 | ||||||||
| l | Salvage Value of New machine | 100,000 | ||||||||||||
| m=c+k+l | Net Cash flow | (762,500) | 215,000 | 215,000 | 215,000 | 215,000 | 315,000 | |||||||
| a. | INITIAL OUTLAY | 762,500 | ||||||||||||
| b. | Annual differential Cash Flow | 215,000 | ||||||||||||
| c. | Terminal Cash Flow | 100,000 | ||||||||||||
Add Answer to:
Question 2 Little Star Company is considering replacing its ex estar company is considering replacing its...
Question 2 * Little Star Company is considering replacing its existing machine with a new one....
Question 2 * Little Star Company is considering replacing its existing machine with a new one. The machine wa vought five years ago at a cost of RM700,000. It has another five years of remaining useful life, with Zen salvage value. If it is sold now, the company can get RM200,000.00 The new machine would cost RM1 million and is expected to have a useful life of nve years. A salvage value of RM100,000 is expected at the end of...
A company is considering replacing one of its existing machines. The existing machine is being depreciated...
A company is considering replacing one of its existing machines. The existing machine is being depreciated at $25,000 per year, and currently has a book value of $50,000. The new machine would have annual depreciation expense of $36,000 per year for five years. In an NPV analysis what depreciation expense would you assigned to the new machine? Show the depreciation expense for all five years.
X Company is considering replacing one of its machines in order to save operating costs. Operating...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $66,000 per year; operating costs with the new machine are expected to be $46,000 per year. The new machine will cost $75,000 and will last for six years, at which time it can be sold for $3,000. The current machine will also last for six more years but will not be worth anything at that time. It cost...
2. Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled...
2.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the...
Hopi Company is considering the possibility of replacing one of its current machines used in production...
Hopi Company is considering the possibility of replacing one of its current machines used in production with a new machine. The new machine has an estimated useful life of eight years. The company uses an 8 percent minimum desired rate of return in determining whether to accept capital investment projects. Below are the estimated net cash inflows from the machine (cash savings from using the new machine instead of the old machine). HOPI COMPANY NET CASH INFLOWS FOR CAPITAL BUDGETING...
Question #2 (covered in Chapter 13) A farm owner is considering replacing his obsolete tractor with...
Question #2 (covered in Chapter 13) A farm owner is considering replacing his obsolete tractor with one of two new state-of-the-tractors. This new machine would cost $125,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value but would result in annual cost savings of $23,000 per year. The current old tractor can be sold now for $10,000. The farm owner’s Cost of Capital is 10%. The farm owner uses the straight line method...
A small factory is considering replacing its existing coining press with a newer, more efficient one....
A small factory is considering replacing its existing coining press with a newer, more efficient one. The existing press was purchased five years ago at a cost of $200,000, and it is being depreciated according to a 7-year MACRs depreciation schedule and the first five years of depreciation have been taken (see below for MACRs chart). The CFO estimates that the existing press has 6 years of useful life remaining. The purchase price for the new press is $306,000. The...
8 nf X Company is considering replacing one of its machines in order to save operating costs.. Operating costs with...
8 nf X Company is considering replacing one of its machines in order to save operating costs.. Operating costs with the current, machine are $62,000 per year; operating costs with the new machine are expected to be $43,000 per year. The nntus machine will cost $72.000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time....
X Company is considering replacing one of its machines in order to save operating costs. Operating...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $49,000 per year. The new machine will cost $71,000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time. It cost...
8 pt X Company is considering replacing one of its machines in order to save operating...
8 pt X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $62,000 per year; operating costs with the new machine are expected to be $49,000 per year. The new machine will cost $69,000 and will 1last for five years, at which time it can be sold for $2,500. The current machine will also last for five more years but will not be worth anything at that time....
Question 2 * Little Star Company is considering replacing its existing machine with a new one. The machine wa vought five years ago at a cost of RM700,000. It has another five years of remaining useful life, with Zen salvage value. If it is sold now, the company can get RM200,000.00 The new machine would cost RM1 million and is expected to have a useful life of nve years. A salvage value of RM100,000 is expected at the end of...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $66,000 per year; operating costs with the new machine are expected to be $46,000 per year. The new machine will cost $75,000 and will last for six years, at which time it can be sold for $3,000. The current machine will also last for six more years but will not be worth anything at that time. It cost...
2.
Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $310,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $52,000 per year to operate and maintain, but would save $93,000 per year in labor and other costs. The old machine can be sold now for scrap for $31,000. The simple rate of return on the...
Hopi Company is considering the possibility of replacing one of its current machines used in production with a new machine. The new machine has an estimated useful life of eight years. The company uses an 8 percent minimum desired rate of return in determining whether to accept capital investment projects. Below are the estimated net cash inflows from the machine (cash savings from using the new machine instead of the old machine). HOPI COMPANY NET CASH INFLOWS FOR CAPITAL BUDGETING...
8 nf X Company is considering replacing one of its machines in order to save operating costs.. Operating costs with the current, machine are $62,000 per year; operating costs with the new machine are expected to be $43,000 per year. The nntus machine will cost $72.000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time....
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $64,000 per year; operating costs with the new machine are expected to be $49,000 per year. The new machine will cost $71,000 and will last for five years, at which time it can be sold for $1,500. The current machine will also last for five more years but will not be worth anything at that time. It cost...
8 pt X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $62,000 per year; operating costs with the new machine are expected to be $49,000 per year. The new machine will cost $69,000 and will 1last for five years, at which time it can be sold for $2,500. The current machine will also last for five more years but will not be worth anything at that time....
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago