2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...

Question

Question

2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The new machine will cost $1.2 millio

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

rate positively ..

i	Annual depreciation on old machine	95000
	665000/7

ii	Book value of machine after 4 year =	285000
	665000-95000*4

iii	Sales price of old machine=		312000
iv=iii-ii	gain on sale =			27000
v=iv*30%	Tax on gain @ 30%			8100

vi-iii-v	Cash flow from sale of old machine=	303900

vii	Purchase price of new machine=	1200000

viii=vii-vi	Net cash outflow =			896100

	ans=				$ 896,100

Add a comment

Answer 2

Similar Homework Help Questions

1. A new project has an intial cost of $350,000 with an expected life of 7...

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...
Nikky Co. is considering replacing an old machine with a new one. The old one was...

Nikky Co. is considering replacing an old machine with a new one. The old one was purchased 3 years ago for $200,000. It is depreciated straight-line to zero over its 10-year life. It is expected to be worth of 85,000 three years later. If Nikky sells it today, Nikky should receive $150,000 for the old machine. The new machine costs $300,000. It has a life of 5 years and will be depreciated straight-line to zero over its 5-year life. It...
Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being d...

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...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery was purchased 4 years ago for $15,000,000 and had an estimated useful life of 6 years; it can be sold today for $7,000,000. The new machine will cost $17,500,000 but will have a 10 year life and scrap value at the end of the 10 years of $4,000,000. The new machine will require shipping and installation costs of $300,000 and $100,000 respectively. As the...
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...
QRW Corp. needs to replace an old lathe with a new, more efficient model. The old...

QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000. It will cost the company $10,000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery was purchased 4 years ago for $15,000,000 and had an estimated useful life of 6 years; it can be sold today for $6,000,000. The new machine will cost $17,500,000 but will have a 10 year life and scrap value at the end of the 10 years of $4,000,000. The new machine will require shipping and installation costs of $300,000 and $100,000 respectively. As the...
Builtrite A is considering replacing a 10 year old machine that originally cost $30,000, has a...

Builtrite A is considering replacing a 10 year old machine that originally cost $30,000, has a current book value of $10,000 with five years of expected life left. The machine is being depreciated over its 15 year life down to a terminal value of $0. Currently, this machine has an expected salvage value of $15,000. The replacement machine that Builtrite is considering would cost $80,000 and be depreciated down to $0 over its five year expected life. At the end...
Arlington Manufacturing is contemplating replacing one of its machines with a new, more efficient machine. The...

Arlington Manufacturing is contemplating replacing one of its machines with a new, more efficient machine. The old machine is being depreciated on a straight-line basis 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...

ABC Corp. is considering replacing one of its existing machines with a new, more automated and...

ABC Corp. is considering replacing one of its existing machines with a new, more automated and efficient one. The old machine has a book value of $100,000. It could be sold today for $50,000. The remaining book value is being straight line depreciated to 0 salvage value, at the rate of $20,000/year. The new machine costs $400,000. If introduced, the company estimates that will save annually $60,000 on a before tax basis. This is considered a year end cash flow....

2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...

Homework Answers

Add Answer to:
2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...

Post as a guest

Earn Coins

1. A new project has an intial cost of $350,000 with an expected life of 7...

Nikky Co. is considering replacing an old machine with a new one. The old one was...

Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being d...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery...

Question 2 * Little Star Company is considering replacing its existing machine with a new one....

QRW Corp. needs to replace an old lathe with a new, more efficient model. The old...

Victoria Energy are considering replacing their existing machinery with new, more efficient equipment. The old machinery...

Builtrite A is considering replacing a 10 year old machine that originally cost $30,000, has a...

Arlington Manufacturing is contemplating replacing one of its machines with a new, more efficient machine. The...

ABC Corp. is considering replacing one of its existing machines with a new, more automated and...

2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...

Homework Answers

Add Answer to: 2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...

Post as a guest

Earn Coins

Add Answer to:
2. Texas Tires is considering replacing an old machine with a new, more efficient, one. The...