Homework Answers
| NPV Calculation | |||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Revenue | $ 21,000.00 | $ 21,000.00 | $ 21,000.00 | $ 21,000.00 | |
| Maintenance expense | $ 2,000.00 | $ 2,500.00 | $ 3,000.00 | $ 3,500.00 | |
| Depreciation | $ 11,332.20 | $ 15,113.00 | $ 5,035.40 | $ 2,519.40 | |
| Interest | $ 2,000.00 | $ 1,395.77 | $ 731.22 | ||
| EBT | $ 5,667.80 | $ 1,991.23 | $ 12,233.38 | $ 14,980.60 | |
| Tax @ 40% | $ 2,267.12 | $ 796.49 | $ 4,893.35 | $ 5,992.24 | |
| PAT | $ 3,400.68 | $ 1,194.74 | $ 7,340.03 | $ 8,988.36 | |
| Add: depreciation | $ 11,332.20 | $ 15,113.00 | $ 5,035.40 | $ 2,519.40 | |
| Less: initial investment | $ 14,000.00 | ||||
| Less: principal paid back | $ 6,042.30 | $ 6,646.53 | $ 7,311.08 | ||
| Net Cash Flow | $ -14,000.00 | $ 8,690.58 | $ 9,661.21 | $ 5,064.35 | $ 11,507.76 |
| NPV @ 10% | $ 13,549.87 | ||||
| Depreciation | |||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Percentage % | 33.33% | 44.45% | 14.81% | 7.41% | |
| Depreciation | $ 11,332.20 | $ 15,113.00 | $ 5,035.40 | $ 2,519.40 |
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PART III. Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit...
PART III. Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit...
PART III. Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,000 for each of the next 4 years and will be sold at the end of that time for an expected salvage value of $4,000. Maintenance and expenses on the equipment are expected to be $2,000 for the fisrt year and to increase by $500 per year for each successive year of operation. Rimrock is purchasing the equipment by paying...
Please explain your answer! PART III Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,000 for each of the next 4 years and will be sold...
Please explain your answer!
PART III Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,000 for each of the next 4 years and will be sold at the end of that time for an expected salvage value of $4,000. Maintenance and expenses on the equipment are expected to be $2,000 for the fisrt year and to increase by $500 per year for each successive year of operation. Rimrock is purchasing...
Whitestone Products is considering a new project whose data are shown below. The required equipment has...
Whitestone Products is considering a new project whose data are shown below. The required equipment has a 3-year tax life, and the accelerated rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 4 cash flow? Equipment cost (depreciable basis) $70,000 Sales revenues, each year $42,500 Operating costs (excl. deprec.) $25,000 Tax rate...
Gerdin Inc. just purchased a piece of new equipment at a cost of $230,000. This equipment...
Gerdin Inc. just purchased a piece of new equipment at a cost of $230,000. This equipment belongs to the MACRS 3-year depreciation class. The associated percentages for different depreciation classes are presented in the following table. What is the annual depreciation of this equipment in year 3? year 3-year 5-year 7-year 1 33.33% 20.00% 14.29% 2 44.45% 32.00% 24.49% 3 14.81% 19.20% 17.49% 4 7.41% 11.52% 12.49% 5 11.52% 8.93% 6 5.76% 8.92% 7 8.93% 8 4.46% $44,160 ...
Question 10 5 pts Elsinore Company is considering the purchase of a new brewing equipment. The...
Question 10 5 pts Elsinore Company is considering the purchase of a new brewing equipment. The new brewing equipment will be depreciated using the MACRS 7-year class. The equipment has an estimated life of 6 years, it costs $100,000, and Elsinore plans to sell the brewing equipment at the end of the sixth year for $10,000. The new brewing equipment is expected to generate new sales of $30,000 per year and the firm's costs will go up by $1,000 per...
Bad Company has a new 4-year project that will have annual sales of 7,900 units. The...
Bad Company has a new 4-year project that will have annual sales of 7,900 units. The price per unit is $19.40 and the variable cost per unit is $7.15. The project will require fixed assets of $89,000, which will be depreciated on a 3-year MACRS schedule. The annual depreciation percentages are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. Fixed costs are $29,000 per year and the tax rate is 35 percent. What is the operating cash flow...
Bear’s Big Bonanza recently purchased new equipment at a cost of $1mm. What will be the...
Bear’s Big Bonanza recently purchased new equipment at a cost of $1mm. What will be the DIFFERENCE in the net assets shown on the balance sheet at the end of Year 2 if the firm uses Straight-Line rather than MACRS depreciation (see table below)? Assume a 3-year life. Year 1 Year 2 Year 3 Year 4 33.33% 44.45% 14.81% 7.41% A. $157,990 B. $133,360 C. $120,987 D. $142,851 E. $111,133
Question 14 5 pts RHPS Company is considering the purchase of a new machine. The new...
Question 14 5 pts RHPS Company is considering the purchase of a new machine. The new machine falls into the MACRS 3-year class, has an estimated life of 3 years, it costs $100,000 and RHPS plans to sell the machine at the end of the third year for $20,000. The new machine is expected to generate new sales of $30,000 per year and added costs of $10,000 per year. In addition, the company will need to decrease inventory by $10,000...
Please help and explain how to do this question Bad Company has a new 4-year project...
Please help and explain how to do this question
Bad Company has a new 4-year project that will have annual sales of 8,500 units. The price per unit is $20.00 and the variable cost per unit is $7.75. The project will require fixed assets of $95,000, which will be depreciated on a 3-year MACRS schedule. The annual depreciation percentages are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. Fixed costs are $35,000 per year and the tax rate...
A piece of newly purchased industrial equipment costs $1,375,000 and is classified as seven-year property under...
A piece of newly purchased industrial equipment costs $1,375,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Depreciation Year Beginning Book Value Ending Book Value 1 2 3 4 6 7 Property...
PART III. Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,000 for each of the next 4 years and will be sold at the end of that time for an expected salvage value of $4,000. Maintenance and expenses on the equipment are expected to be $2,000 for the fisrt year and to increase by $500 per year for each successive year of operation. Rimrock is purchasing the equipment by paying...
Please explain your answer!
PART III Rimrock Construction Co. is purchasing a new piece of equipment for $34,000. The unit is expected to produce $21,000 for each of the next 4 years and will be sold at the end of that time for an expected salvage value of $4,000. Maintenance and expenses on the equipment are expected to be $2,000 for the fisrt year and to increase by $500 per year for each successive year of operation. Rimrock is purchasing...
Question 10 5 pts Elsinore Company is considering the purchase of a new brewing equipment. The new brewing equipment will be depreciated using the MACRS 7-year class. The equipment has an estimated life of 6 years, it costs $100,000, and Elsinore plans to sell the brewing equipment at the end of the sixth year for $10,000. The new brewing equipment is expected to generate new sales of $30,000 per year and the firm's costs will go up by $1,000 per...
Bad Company has a new 4-year project that will have annual sales of 7,900 units. The price per unit is $19.40 and the variable cost per unit is $7.15. The project will require fixed assets of $89,000, which will be depreciated on a 3-year MACRS schedule. The annual depreciation percentages are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. Fixed costs are $29,000 per year and the tax rate is 35 percent. What is the operating cash flow...
Question 14 5 pts RHPS Company is considering the purchase of a new machine. The new machine falls into the MACRS 3-year class, has an estimated life of 3 years, it costs $100,000 and RHPS plans to sell the machine at the end of the third year for $20,000. The new machine is expected to generate new sales of $30,000 per year and added costs of $10,000 per year. In addition, the company will need to decrease inventory by $10,000...
Please help and explain how to do this question
Bad Company has a new 4-year project that will have annual sales of 8,500 units. The price per unit is $20.00 and the variable cost per unit is $7.75. The project will require fixed assets of $95,000, which will be depreciated on a 3-year MACRS schedule. The annual depreciation percentages are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. Fixed costs are $35,000 per year and the tax rate...
A piece of newly purchased industrial equipment costs $1,375,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Depreciation Year Beginning Book Value Ending Book Value 1 2 3 4 6 7 Property...
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