2) What is the net equipment cost, given the following, when a new piece of equipment...
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
Homework Answers
Solution:-
Step 1: Calculation of proceeds from selling old equipment:
Capital gain tax on sale= (Sale consideration-book value)*40% = (125,000-22,000)*40%= $41,200
Proceeds from sale= Sale consideration- capital gain tax = $125,000-$41,200 = $83,800
Step 2: Calculation of gross cash outflow on purchase of new equipment
Gross cash outflow= New equipment cost + Site survey + Installation cost
Gross cash outflow= 800,000 + 18,000 + 20,000 = $838,000
Step 3: Calculation of net equipment cost
Net equipment cost= Gross cash outflow for new equipment - proceeds from sale of old equipment
Net equipment cost= $838,000 - $83,800 = $754,200
Thus, the net equipment cost is $754,200 for the buyer.
Please feel free to ask any doubts in the comments section.
Add Answer to:
2) What is the net equipment cost, given the following, when a
new piece of equipment...
Finance Problems 1) What is the initial outlay, given the following information: Equipment Price. $375,000 Installation....
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...
The Bistro is planning to add a new line of noodles that will require the acquisition of new processing equipment. The equipment will cost $1,000,000, including installation and shipping. It will be depreciated straight-line to zero value over the 10-year
The Bistro is planning to add a new line of noodles that will require the acquisition of new processing equipment. The equipment will cost $1,000,000, including installation and shipping. It will be depreciated straight-line to zero value over the 10-year economic life of the project. Interest cost associated with financing the equipment purchase is estimated to be $40,000 annually. The expected salvage value of the machine at the end of 10 years is $200,000. One year ago a marketing survey...
Another department has selected a new piece of equipment to replace an old piece of equipment...
Another department has selected a new piece of equipment to
replace an old piece of equipment in your plant. You have been
asked to estimate the economic life of the new piece of equipment
and the EAC for that economic life. Additionally, you have been
asked to estimate what the marginal cost is to keep the existing
piece of equipment for an additional year. You have been provided
the following details. Your firm’s interest rate is 9%. The
purchase price...
The management of Mega Builders is considering replacing an old piece of equipment. The following information...
The management of Mega Builders is considering replacing an old piece of equipment. The following information is provided : The equipment it wants to replace(old equipment) was purchased 5 years ago for $1.5m. It had a useful life of 15 years and the company applies straight-line depreciation with zero salvage value. The equipment’s current market value is $1.2m. If the company keeps using it, this piece of equipment will generate annual sales of $200,000 and incur annual cash operating expense...
Spencers Majestic Foods is considering the replacement of some old equipment. The new equipment will cost...
Spencers Majestic Foods is considering the replacement of some old equipment. The new equipment will cost $109,000 including delivery and installation. The old equipment to be replaced has a book value of $76,300 and can be sold pre-tax for $74,300. If the firm’s effective tax rate is 25%, compute the net investment. $32,700 $34,700 $33,200 $34,200
XYZ Company is considering the purchase of a new piece of equipment and has gathered the...
XYZ Company is considering the purchase of a new piece of equipment and has gathered the following information about the purchase: Initial investment .............. ? Annual cost savings ............. $20,000 Salvage value in 6 years ........ 20% of original cost of the equipment Repair in 4 years ............... $14,000 Cost of capital ................. 10% Life of project ................. 6 years The net present value of this new equipment was -$37,779. Calculate the salvage value for this piece of equipment.
A company is evaluating the acquisition of a new piece of equipment. The base price of...
A company is evaluating the acquisition of a new piece of equipment. The base price of the equipment is $100,000 and it will cost an additional $10,000 for shipping and installation. The company also paid a firm $5,000 to determine the feasibility of the new piece of equipment. The equipment falls in the MACRS 3 year class and would be sold after 4 years for $18,000. The new equipment would require an increase in inventory of $4,000, which will be...
1- You are evaluating a capital project for equipment with a total installed cost of $750,000....
1- You are evaluating a capital project for equipment with a total installed cost of $750,000. The equipment has an estimated life of 30 years, with an expected salvage value at the end of the project of $50,000. The project will be depreciated via simplified straight-line depreciation method. In addition, a working capital investment of $5,000 is required. The project replaces an old piece of equipment which is currently in service and is fully depreciated, but has an expected after-tax...
Sansariff Company invests in a new piece of equipment costing $40,000. The equipment is expected to...
Sansariff Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life: Cash revenues $ 60,000 Cash expenses (32,000) Depreciation expenses (straight-line) (10,000) Income provided from equipment $ 18,000 Cost of capital 14% What is the net present value of this investment in equipment, assuming no taxes are paid?
. The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line...
. The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6) The old machine is also being depreciated on a straight-line basis. It has a book value or 200,000 (at year 0) and four more years of depreciation left ($50,000 per year). . The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old...
Another department has selected a new piece of equipment to
replace an old piece of equipment in your plant. You have been
asked to estimate the economic life of the new piece of equipment
and the EAC for that economic life. Additionally, you have been
asked to estimate what the marginal cost is to keep the existing
piece of equipment for an additional year. You have been provided
the following details. Your firm’s interest rate is 9%. The
purchase price...
. The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6) The old machine is also being depreciated on a straight-line basis. It has a book value or 200,000 (at year 0) and four more years of depreciation left ($50,000 per year). . The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old...
Most questions answered within 3 hours.
-
Determine the pH of a 0.0500 M KBr solution (using activity
coefficients when needed)
( please...
asked 1 minute from now -
Determine the pH of a 0.10 M
CH3NH3Cl solution.
(Kb
(CH3NH2) = 4.4 x 10-4)
2.18...
asked 1 minute ago -
Bender's skateboards have the following manufacturing
expenses:
Direct Materials: $10/unit
Direct Labor: $8/unit
Rent: $10,000/month
Depreciation:...
asked 7 minutes ago -
9) A resistor is connected to a capacitor of 4 micro-farads
without a battery. The initial...
asked 15 minutes ago -
Via Gelato is a popular neighborhood gelato shop. The company
has provided the following cost formulas...
asked 36 minutes ago -
The Williams have a stock they have held for over a year that
they believe is...
asked 1 hour ago -
11.53g sample of NaBr contains 22.34% Na by mass Considering
the law of constant composition how...
asked 2 hours ago -
Exercise 5-22A Complete the accounting cycle using receivable
transactions (LO5–1, 5–2, 5–4, 5–5, 5–7) [The following...
asked 3 hours ago -
Do you agree with the view that small businesses are more
vulnerable to employee theft because...
asked 3 hours ago -
Four forces act on an object, given by A = 41.3 N east, B = 46.3...
asked 4 hours ago -
Which of the following design considerations leads to more
user-friendly presentation layers for GUIs? [Check all...
asked 5 hours ago -
38%
of adults say cashews are their favorite kind of nut. You
randomly select 12 adults...
asked 7 hours ago