Net initial cash outlay = Fixed Capital Investments + Net Working Capital Investments - Salvage Value of the old Project + Tax (Salvage Value - Book Value)
Net initial cash outlay = 4,000,000 + 20,000 + 0 - 500,000 + 0.35(500,000 - 250,000)
= 3520,000 + 87,500
= 3,607,500
1. A new project will cost $4,000,000 and will take $20,000 for installation and testing. It...
Finance Problems 1) What is the initial outlay, given the following information: Equipment Price. $375,000 Installation. 10,000 Power Survey 30,000 Shipping. 8,000 Working Capital 100,000 Project Marketing Report 15,000 2) What is the net equipment cost, given the following, when a new piece of equipment replaces an old one: Old equipment sells for $125,000 Book value of old equipment 22,000 TaxRate 40% New equipment cost 800,000 Site survey 18,000 Installation cost 20,000 3) Equipment is sold for $30,000 at the...
Focus Inc. is considering the acquisition of a new piece of equipment. The machine's price is $750.000. In addition, installation and transportation costs would be $60.000 and it would require $15,000 in spare parts thus increasing the firm's net working capital by that amount. The system falls into the MACRS 3-year class (depreciation rates of 33%, 45%, 15%, and 7%). The current machine it would replace could be sold for $85,000 and currently is being earried on the books for...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years. The company the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a rate of 20% and the opportunity cost of capital is 20%, is the...
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial manager of the company expects this project will cut the direct production costs by $30,000 per year. For tax purposes the project can be depreciated straight-line over 5 years.. The company will pay insurance expense of $5,000 per year beginning with the installation of the machine. The salvage value of the machine is expected to be $15,000. If the company pays tax at a...
A project you are evaluating has expected cash flows of $120,000, $140,000, $150,000 and $150,000. If the required outlay is $250,000, then: What is the NPV of the project if your required rate is 14%? What is the IRR for the project? A project is using heavy equipment. The equipment will have a purchase price of $550,000. The equipment needs to be transported overseas, and this cost will be $25,000. In addition, once the equipment arrives it will require significant...
1. A new project has an intial cost of $350,000 with an expected life of 7 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 4-year term and the firm's tax rate is 40%, calculate the cashflows of the project over its estimated life. 2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The new machine will cost $1.2...
Problem 2 EM Industries is considering a new project involving the acquisition of a new machine that would replace an older machine currently in use. The new machine costs $750,000 (at t-0) and can be sold at the end of its expected 4-year operating life for $100,000 (at t-4). The new machine takes up more space and EM will need to move maintenance and cleaning supplies that used to be stored next to the machine to a small storage room...
8 & 9
(15 pts) 8. Crowder Manufacturing, Inc. is considering the replacement of an existing machine. The new machine costs $750,000 and requires installation costs of $250,000. The existing machine can be sold currently for $300,000 before taxes. It is one year old, cost $600,000 new, and has a $500,000 book value and a remaining useful life of 5 years. Depreciation expense on the existing machine is $100,000 per year. Over its 5-year life, the new machine should reduce...