Your company is considering the replacing an old machine with a more efficient model. The new machine costs $39,500, will last for 7 years and save $12,900 per year in expenses. The discount rate is 18% and the tax rate is 26%. The machine will be depreciated on a straight line basis to zero. The old machine is fully depreciated and can be sold today for $2,700. A) what is the amount of initial investment required? B) what is the after-tax gain on the sale of the old machine? The old machine is fully depreciated. C) what is the amount of operating cash flow (OCF) per year? D) what is the NPV of the project?
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- Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
- Quorum Corp. wants to replace a 5-year-old machine with a new machine that is more efficient. The old machine cost $20,000 when new and has a current book value of $8,000. Quorum can sell the old machine for $5,000. The company has a marginal tax rate of 40%. What will be the cash flow impact from the sale of the old machine on the initial outlay for a new machine? a) $3,800 b) $5,000 c) $6,200 d) $8,000A chemical company is considering buying a magic fan for its plant. Th e magic fan is expected to work forever and help cool the machines in the plant and, hence, reduce their maintenance costs by $6,000 per year. Th e cost of the fan is $50,000. Th e appropriate discount rate is 10 percent, and the marginal tax rate is 35 percent. Should the company buy the magic fanChauhan Restaurant is considering the purchase of a soufflé maker that costs $10,000. The soufflé maker has an economic life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 1,600 soufflés per year, with each costing $2.50 to make and priced at $4.75. The discount rate is 10 percent and the tax rate is 21 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Tip: Calculate OCF first, then calculate the NPV of the project.
- Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don’t replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don’t expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don't replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don't expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…Chauhan Restaurant is considering the purchase of a soufflé maker that costs $10,100. The soufflé maker has an economic life of 6 years and will be fully depreciated by the straight-line method. The machine will produce 1,700 soufflés per year, with each costing $2.80 to make and priced at $4.75. The discount rate is 12 percent and the tax rate is 25 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
- It is being decided whether the company is buying a delivery truck worth 25000 USD, which can be rented out to other warehouses in your area. For a useful life of 15 yrs, it is projected that you can earn as much as 3100 USD. At the end of its useful life, the salvage value is zero. Disregarding taxes, the ROR is projected to be approximately equal to: 7.1% 6.5% 5.3% 4.2% Other:Your company is purchasing a new machine to make toys. The machine costs $1,866,000 today and will be depreciated straight-line over 5 years to a salvage value of $100,000. You anticipate that the machine can be sold in 5 years for $169,000. The machine will allow your company to increase its production and associated revenues by $1,374,000 each year. The incremental yearly cost of goods sold for these additional widgets is $588,000, and the incremental SGA expense associated with selling these toysis $142,000 per year. The new machine will require an initial one-time increase in working capital, mainly raw material inputs, of $93,000. The working capital will be recaptured at the end of the project in 5 years. The firm’s marginal tax rate is 31% and the discount rate is 5%. What is the NPV of the project?(Ignore income taxes in this problem.) Your Company has some equipment that can either be repaired right now for $40,000 or sold for $13,000 scrap value. As an alternative, Your Company could buy new equipment for $145,000. Both pieces of equipment would last 8 years. The annual operating expenses of the new equipment would be $6,500 less than the operating costs of the old machine. In addition, the new machine would be able to produce 100 more units that can be sold for a contribution margin of $80 per unit. The new equipment is expected to have a $14,000 salvage value in 8 years. Your Company discount rate is 7%. What is the net present value of the decision to buy the new equipment instead of repairing the old equipment? O $400 O $3,146 O $2.728 O ($5,421)