An injection molding machine can be purchased and installed for $90,000. It is in the seven-year GDS property class and is expected to be kept in service for eight years. It is believed that $10,000 can be obtained when the machine is disposed of at the end of year eight. The net annual value added (i.e., revenues less expenses) that can be attributed to this machine is constant over eight years and amounts to $15,000. An effective income tax rate of 25% is used by the company, and the after-tax MARR equals 15% per year. (7.4, 7.9) What is the approximate value of the company’s before-tax MARR? Determine the GDS depreciation amounts in years one through eight. What is the taxable income at the end of year eight that is related to capital investment? Set up a table and calculate the ATCF for this machine. Should a recommendation be made to purchase the machine?
An injection molding machine can be purchased and installed for $90,000. It is in the seven-year ...
An injection molding machine can be purchased and installed for $120000. It is in the seven-year GDS property class and is expected to be kept in service for 8 years. It is believed that $10000 can be obtained when the machine is disposed of at the end of year 8. The net annual value added (i.e., revenues less expenses) that can be attributed to this machine is constant each year and amounts to $37000. An effective income tax rate of...
1. An injection mokding machine can be purchased and installed for $80,000 It is in the seven-year GDS property class and is expected to be kept in servioe for eight years. It is believed that $12,000 can be obtained when the machine is disposed of at the end of year eight. The net annual value added (i.e, revenues less expenses) that can be attributed to this machine is constant over eight years and amounts to $15,000, An effective income tax...
.ATCF Analysis: (15 ptos) ACME Inc. is contemplating the purchase of a new caterpillar machine. The machine will cost $180,000. Its market value at the end of five years is estimated as $40,000. The accounting department uses the MACRS GDS-3 years recovery period depreciate the equipment. The justification for this machine include $60,000 savings per year in labor and $30,000 savings per year in reduced material. Equipment life 5 years, Tax rate 40% MARR is 10%. Use this information to...
.ATCF Analysis: (15 ptos) ACME Inc. is contemplating the purchase of a new caterpillar machine. The machine will cost $180,000. Its market value at the end of five years is estimated as $40,000. The accounting department uses the MACRS GDS-3 years recovery period depreciate the equipment. The justification for this machine include $60,000 savings per year in labor and $30,000 savings per year in reduced material. Equipment life 5 years, Tax rate 40% MARR is 10%. Use this information to...
Larson Manufacturing is considering purchasing a new injection-molding machine for $250,000 to expand its production capacity. It will cost an additional $20,000 to do the site installed. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $90,000 per year. The machine will be used for five years, with an expected salvage value of $75,000. a. Compute the NPV of the project at an interest rate of 12% . b. Based on NPV, would the purchase...
6) (28 points) A company is considering a replacement for an aging machine that has been fully depreciated for tax purposes. The new machine will have an initial cost of $400,000 and is expected to generate an income of $125,000 per year. Its estimated salvage value at the end of its useful life of 4 years will be $60,000. The new machine is a MACRS-GDS 3-year property for calculating depreciation deductions. The effective tax rate is 35%. a) (20 points)...
by installing a new injection molding machine into its assembly line, plastic molding Inc. can decrease its production cost by an estimated $35,000 the first year of installment, with an additional decrease of $4,000 each year throughout the life of the equipment. It is estimated the new equipment will have a 10 years useful life and a salvage equal to 10% of its initial cost. Use a nominal interest rate of 15% to calculate how much plastic molding Inc. can...
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,600 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its...
The Wagner Company currently uses an injection-molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6=$350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Wagner is offered a...
The Rioja Company (Rioja), a Spanish-based manufacturer of pleasure sailing boats, purchased a fiberglass molding machine on January 1, Year 1 for Euro 100,000. The use life of the molding machine for book purposes is 10 years on a straight-line basis with no salvage value. The Spanish tax authorities allow for depreciation for this type of machine over 5 years on a straight-line basis. The corporate tax rate in Spain is 35%. The book basis, the tax basis, and the...