(Capital gains tax) The J. Harris Corporation is considering selling one of its old assembly machines....
Franco is considering replacing one of its machines. The old machine is being depreciated on a straight-line basis down to a salvage value of zero over the next 5 years. It has a book value of $200,000 and could be sold for $120,000. The replacement machine would cost $600,000 and have an expected life of 5 years, after which it could be sold for $100,000. Because of reductions in defects and material savings, the new machine would produce cash benefits...
Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being depreciated on a straight-line basis down to a salvage value of zero over the next 5 years. It has a book value of $200,000 and could be sold for $120,000. The replacement machine would cost $600,000 and have an expected life of 5 years, after which it could be sold for $100,000. Because of reductions in defects and material...
Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight -line method over a useful life of 8 years. The old van could be sold today for $7000. The new van has an invoice price of $80,000 and it will cost $6000 to modify the van to carry the...
The G.Rod Electronic Component is considering replacing a 10 year-old machine that originally cost $37,500, has a current book value of $12,500 with 5 years of expected life left, and is being depreciated using the simplified straight-line method over its 15-year expected life down to a terminal value of zero in 5 years, generating depreciation of $2,500 per year. The replacement machine being considered would cost $100,000 and have a 5-year expected life over which it would be depreciated using...
The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered will result in an increase in earnings before interest and taxes of $32,000 per year, it has a purchase price of $95,000 and it would cost an additional $3,000 after tax to correctly install this machine. In addition, to properly operate this machine, inventory must be increased by $5,500 This machine has an expected life of 10 years, after which it will...
X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $65,000 per year; operating costs with the new machine are expected to be $50,000 per year. The new machine will cost $69,000 and will last for four years, at which time it can be sold for $3,000. The current machine will also last for four more years but will not be worth anything at that time. It cost...
Bailey Corporation is considering modernizing its production by
purchasing a new machine and selling an old machine. The following
data have been collected on this investment:
Testbank Question 57 Bailey Corporation is considering modernizing its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: Old Machine Cost Accumulated amortization Remaining life Current salvage value Salvage value in 4 years Annual cash operating costs $40,000 $20,000 4 years $5,000 New...
The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can be sold for $60,000. This machine is totally depreciated. The replacement machine would cost $125,000, and have a 5-year expected life over which it would be depreciated down using the straight-line method and have no salvage value at the end of five years. The new machine would produce savings before depreciation and taxes of $45,000 per year. Assuming a 34 percent marginal tax rate...
Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled, Information about the two alternatives follows. Management requires a 8% rate of return on its investments. Use the (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for...
The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of $65,000 per year. The machine has a purchase price of $350,000,and it would cost an additional $9,000 after tax to install this machine correctly. In addition, to operate this machine properly, inventory must be increased by $14,000. This machine has an expected life of 10 years, after which time it...