A machine has an initial cost of $10,000 and a salvage value of $2,000 after a...
A machine has an initial cost of $10,000 and a salvage value of $2,000 after a 5 year life. Annual benefits from using the machine are $5000 and the annual cost of operation is $1800. The tax rate is 50%. Assume straight line depreciation. Find the IRR?
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Homework Answers
IRR: It is the discount rate at which the present value of projects cash outflows (cost) is equal to the present value of projects cash inflow.
IRR = 8.95%
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A machine has an initial cost of $10,000 and a salvage value of $2,000 after a...
10) You buy a machine now for $10,000. The machine can be depreciated using DDB depreciation with 5 years useful life and $2,000 salvage value. Three years later you sell the machine for $1,000....
10) You buy a machine now for $10,000. The machine can be depreciated using DDB depreciation with 5 years useful life and $2,000 salvage value. Three years later you sell the machine for $1,000. The annual net benefit is $8000. The inflation rate is 5% per year. The acceptable real after-tax rate of return after taking inflation into consideration is 10%. Combined incremental tax rate is 50%. Calculate PW of this investment a) $4102 b) $3654 c) $3181 d) $2706...
•Original Machine –Initial cost = 100,000 –Annual depreciation = 9,000 –Purchased 5 years ago –Book Value...
•Original Machine –Initial cost = 100,000 –Annual depreciation = 9,000 –Purchased 5 years ago –Book Value = 55,000 –Salvage today = 65,000 –Salvage in 5 years = 10,000 •New Machine –Initial cost = 150,000 –5-year life –Salvage in 5 years = 0 –Cost savings = 50,000 per year –3-year MACRS depreciation •Required return = 10% •Tax rate = 40% Based on this information calculate the cash flows generated by replacing the old machine with the new one and the IRR...
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ 85,000 Working capital reduction $ 55,000 Tax rate 35% *Depreciation straight-line over life 5 What is the IRR of the project?
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ 85,000 Working capital reduction $ 55,000 Tax rate 35% *Depreciation straight-line over life 5 What is the IRR of the project?
5. (20 Points) A company purchased a machine for $50,000 that has an estimated salvage value of $10,000 at the end...
5. (20 Points) A company purchased a machine for $50,000 that has an estimated salvage value of $10,000 at the end of 8 year useful life. Compute the depreciation table by (a) Straight Line method (b) MACRS method (7-year property) (e) If you want to sell the machine in 4th year what book value you will use? (d) What book value you will use to pay tax to IRS in 4th year?
5. (20 Points) A company purchased a machine...
3. A machine is purchased for S70,000. Life is 10 years with a S 10,000 salvage. MARR is 10%, and...
please show work that is easy to UNDERSTAND
3. A machine is purchased for S70,000. Life is 10 years with a S 10,000 salvage. MARR is 10%, and the tax rate is 50%. Cash operating costs are $4500 per year. Five year MACRS (20, 32, 19.2. 11.52, 11.52,5.76) depreciation will be used. Calculate the annual equivalent revenue requirements for this machine.
3. A machine is purchased for S70,000. Life is 10 years with a S 10,000 salvage. MARR is 10%,...
machine 1: cost 76,000 salvage value 6,000 useful life 10 years purchased 7/1/16 machine 2: cost...
machine 1:
cost 76,000
salvage value 6,000
useful life 10 years
purchased 7/1/16
machine 2:
cost 80,000
salvage value 10,000
useful life 8 years
purchased 1/1/13
machine 3:
cost 78,000
salvage value 6,000
useful life 6 years = 24,000 hours
purchased 1/1/18
Problem: In recent years, Hrubeck Company purchased three machines. Because of heavy turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods were selected. Information concerning...
The cost of a machine is $10,000. The annual operation cost and maintenan machine is expected to save $1000 p...
The cost of a machine is $10,000. The annual operation cost and maintenan machine is expected to save $1000 per year in labor costs. The salvage value a $3.000 Calculate machine's equivalent uniform annual worth (EUAW) at an interest rate of 50% The total equivalent uniform annual worth (EUAW) of an asset is given by: EUAW = EUAB (benefits) - EUAC (costs)
Exercise 5 a. A new operating system for an existing machine is expected to cost $520,000...
Exercise 5 a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of 6 years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000 b. A machine costs $380,000, has a $20,000 salvage value is expected to last 8 years, and will generate an after tax income of $60,000 per year after straight-line depreciation. Compute...
A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and...
A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000 and a five-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,200 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life: $2,000 $5,400 $1,000 $1,800 $2,400
10) You buy a machine now for $10,000. The machine can be depreciated using DDB depreciation with 5 years useful life and $2,000 salvage value. Three years later you sell the machine for $1,000. The annual net benefit is $8000. The inflation rate is 5% per year. The acceptable real after-tax rate of return after taking inflation into consideration is 10%. Combined incremental tax rate is 50%. Calculate PW of this investment a) $4102 b) $3654 c) $3181 d) $2706...
5. (20 Points) A company purchased a machine for $50,000 that has an estimated salvage value of $10,000 at the end of 8 year useful life. Compute the depreciation table by (a) Straight Line method (b) MACRS method (7-year property) (e) If you want to sell the machine in 4th year what book value you will use? (d) What book value you will use to pay tax to IRS in 4th year?
5. (20 Points) A company purchased a machine...
please show work that is easy to UNDERSTAND
3. A machine is purchased for S70,000. Life is 10 years with a S 10,000 salvage. MARR is 10%, and the tax rate is 50%. Cash operating costs are $4500 per year. Five year MACRS (20, 32, 19.2. 11.52, 11.52,5.76) depreciation will be used. Calculate the annual equivalent revenue requirements for this machine.
3. A machine is purchased for S70,000. Life is 10 years with a S 10,000 salvage. MARR is 10%,...
machine 1:
cost 76,000
salvage value 6,000
useful life 10 years
purchased 7/1/16
machine 2:
cost 80,000
salvage value 10,000
useful life 8 years
purchased 1/1/13
machine 3:
cost 78,000
salvage value 6,000
useful life 6 years = 24,000 hours
purchased 1/1/18
Problem: In recent years, Hrubeck Company purchased three machines. Because of heavy turnover in the accounting department, a different accountant was in charge of selecting the depreciation method for each machine, and various methods were selected. Information concerning...
The cost of a machine is $10,000. The annual operation cost and maintenan machine is expected to save $1000 per year in labor costs. The salvage value a $3.000 Calculate machine's equivalent uniform annual worth (EUAW) at an interest rate of 50% The total equivalent uniform annual worth (EUAW) of an asset is given by: EUAW = EUAB (benefits) - EUAC (costs)
Exercise 5 a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of 6 years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000 b. A machine costs $380,000, has a $20,000 salvage value is expected to last 8 years, and will generate an after tax income of $60,000 per year after straight-line depreciation. Compute...
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