Homework Answers
Depriciation = 120,000 / 3 = 40,000
Free Cash Flow = (Saving in Operating Costs - Depriciation - taxes) + Depriciaiton
= (50000 - 40000 - 40%(50000 - 40000)) + 40000
= 46,000
NPV = Present Value of Cash Inflow - Present Value of Cash Outflow
= Annual Free Cash Flow * PVAF (3 years, 12%) - 120,000
= 46,000 * 2.40183126819 - 120,000
= 110,484.24 - 120,000
= - 9515.76 OR - 9516
option A is correct.
Add Answer to:
Cliff Corp is considering a $120,000 machine that will reduce pretax operating costs by $50,000 per...
n Holmes Manufacturing is considering a new machine that costs $260,000 and would reduce pretax manufacturing...
n Holmes Manufacturing is considering a new machine that costs $260,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and managemer hinks the machine would have a value of $24,000 at the end of its 5-year operating life. The applicable depreciation ates are 33%, 45%, 15 % , and 7 % . Net operating working capital would increase by $26,000 initially, but it would be recovered at the...
Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce pretax manufacturing costs...
Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $24,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45 %, 15%, and 7%. Net operating working capital would increase by $25,000 initially, but it would be recovered at the end of the project's...
Francis, LLC is considering a 4-year project with an initial cost of $120,000. The equipment depreciation is straight-li...
Francis, LLC is considering a 4-year project with an initial cost of $120,000. The equipment depreciation is straight-line to zero over the life of the project. The firm believes that they can sell the equipment for the salvage value of $40,000 at the end of the project. The tax rate is 40%. The project requires no additional working capital over the life of the project. Annual operating cash flows are $48,000. Assuming a required rate of return of 10%, what...
NEW PROJECT ANALYSIS Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce...
NEW PROJECT ANALYSIS Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $25,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45 % , 15 %, and 7%. Net operating working capital would increase by $22,000 initially, but it would be recovered at...
Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs...
Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's...
sercises 16.1 The SBX Construction Company is considering an investment of $50,000 for a horizontal boring...
sercises 16.1 The SBX Construction Company is considering an investment of $50,000 for a horizontal boring machine. There is no increase in working capital require- ments and no tax credits. Depreciation is straight line and the salvage value is zero. The tax rate is 40 percent and the required IRR is 15 percent. Cash op- erating costs are $10,000 a year. Cash operating revenues are $30,000 per year. The estimated life of the boring machine is five years. a. Determine...
A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and...
A company is evaluating the purchase of Machine A. The new machine would cost $120,000 and would be depreciated for tax purposes using the straight-line method over an estimated ten-year life to its expected salvage value of $20,000. The new machine would require an addition of $30,000 to working capital. In each year of Machine A’s life, the company would reduce its pre-tax costs by $40,000. The company has a 12% cost of capital and is in the 35% marginal...
You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated...
You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated using straight-line to an expected salvage value of zero over its original 10-year life and could now be sold for $40,000. The replacement machine would cost $190,000 and have a five-year expected life. It would be depreciated using the MACRS 5-year class life. The actual expected salvage value of this machine after five years is $20,000. The new machine is expected to operate much...
Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. The machine...
Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years. Under the new tax law, the machine is eligible for 100% bonus depreciation, so it will be fully depreciated at t= 0. The firm expects to operate the machine for 4 years and then to sell it for $21,500. If the marginal tax rate is 25%, what will the after-tax salvage value be when the machine is...
Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs...
Madison Manufacturing is considering a new machine that costs $350,000 and would reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $33,000 at the end of its 5-year operating life. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would increase by $35,000 initially, but it would be recovered at the end of the project's 5-year life. Madison's...
n Holmes Manufacturing is considering a new machine that costs $260,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and managemer hinks the machine would have a value of $24,000 at the end of its 5-year operating life. The applicable depreciation ates are 33%, 45%, 15 % , and 7 % . Net operating working capital would increase by $26,000 initially, but it would be recovered at the...
Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $24,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45 %, 15%, and 7%. Net operating working capital would increase by $25,000 initially, but it would be recovered at the end of the project's...
NEW PROJECT ANALYSIS Holmes Manufacturing is considering a new machine that costs $240,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $25,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45 % , 15 %, and 7%. Net operating working capital would increase by $22,000 initially, but it would be recovered at...
sercises 16.1 The SBX Construction Company is considering an investment of $50,000 for a horizontal boring machine. There is no increase in working capital require- ments and no tax credits. Depreciation is straight line and the salvage value is zero. The tax rate is 40 percent and the required IRR is 15 percent. Cash op- erating costs are $10,000 a year. Cash operating revenues are $30,000 per year. The estimated life of the boring machine is five years. a. Determine...
Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years. Under the new tax law, the machine is eligible for 100% bonus depreciation, so it will be fully depreciated at t= 0. The firm expects to operate the machine for 4 years and then to sell it for $21,500. If the marginal tax rate is 25%, what will the after-tax salvage value be when the machine is...
Most questions answered within 3 hours.
-
If you were an international firm, why would you support the
concept of global free trade?...
asked 1 minute ago -
Cisco packet tracer
Q1) Do you get any changes of IP address when packet is
traversing...
asked 44 minutes ago -
What is the pressure inside a 33.0 L container holding 106.4 kg
of argon gas at...
asked 1 hour ago -
Question no 2
A housekeeping support department budgets its costs at
SR 40,000 per month plus...
asked 1 hour ago -
A 1400Kg sports car accelerates from rest to 90km/h in 7.0s.
What is the average power...
asked 2 hours ago -
For the following reaction, 0.128 moles of
potassium hydrogen sulfateare mixed with
0.504 moles of potassium...
asked 5 hours ago -
1. What is the present value of $400, three years in the future
if the interest...
asked 6 hours ago -
The labor force minus the number of employed equals the number
of unemployed.
a. True
b....
asked 8 hours ago -
Determine the mass in units of grams [g] of 0.49 moles [mol]
of a new fictitious...
asked 8 hours ago -
A horizontal mass of M=5kg is on a spring and stretched to
x=0.5m when released from...
asked 10 hours ago -
26 of 50
"I have worked at the Arizona Humane Society for ten years, and
have...
asked 10 hours ago -
Compare and contrast zero based budgeting and incremental (or
base year) budgeting.
asked 10 hours ago