Bha Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $340,000. If theequipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.Year 1Year 2Year 3Year 4Year 5Year 6EarningsbeforeDepreciation$ 106,000160,000105,00056,00058,00035,000The firm is in a 25 percent tax bracket and has a 13 percent cost of capital.a. Calculate the net present value.Note: A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answerto the nearest whole dollar amount.> Answer is not complete.Net present value

NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Answered: Oregon Forest Products will acquire new…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

Company A is considering the purchase of a new equipment. This equipment will cost $250,000 and will be depreciated using an MACRS GDS recovery period of 7 years. The equipment is expected to have a market value of $50,000 at the end of its estimated 8-year life. What is the depreciation amount on the second year? What is the Book Value at the end of the 3rdyear? Assume that the asset will be disposed of in year 3.
Estimate the value of the property using the income approach based on the following facts: Net operating income annually for next 3 years is $400000 At end of three years, property is sold with an existing cap rate of 10% and a commission of 4% on sale The discount cap rate is the same as the existing cap rate and the operating income is assumed to be received at year end
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $320,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12- 12. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Earnings before Depreciation $ 83,000 120,000 85,000 52,000 46,000 29,000 The firm is in a 25 percent tax bracket and has a 8 percent cost of capital. a. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole dollar amount.) Answer is complete but not entirely correct. Net present value $ 7,370.00 X b. Under the net present value method, should Oregon Forest Products purchase the equipment asset? Yes x No
A company purchase a piece of manufacturing equipment for an additional income. The expected income is $4,500 per semester. Its useful life is 9 years. Expenses are estimated to be $500 semiannually. If the purchase price is $44,000 and there is a salvage value of $4,500, what is the prospective rate of return (IRR) of this investment? The IRR is compounded semiannually. O a. IRR = 3% semiannual O b. IRR = 12% semiannual O c. IRR = 8.02% semiannual O d. IRR = 6% semiannual
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $420,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12- 12. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Earnings before Depreciation $135,000 182,000 125,000 68,000 69,000 39,000 The firm is in a 25 percent tax bracket and has a 12 percent cost of capital. a. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole dollar amount.) Net present value
Your company leases cars to other companies for revenue. You intend to invest BD13,000 this year to expand the rental car fleet. The following cars are available in the market at the time of purchase (January 2022). Assume all cars' useful life is eight years from the year of production. All cars were produced in January. For a 10% per year MARR and the Robust method (6 steps), determine: a. Which cars should be purchased based on NPV? b. The total capital needed for this investment. c. The leftover amount? d. What will you do with the leftover amount? Car Year Market Value, Salvage Value, BD Annual Operating Annual Revenue, Cost, BD 350 BD Model Altima 2021 BD 8,200 2,629 2,640 BMW 2020 15,000 5,657 450 3,360 Camry 2018 5,700 2,335 400 2,160 Kia Rio 2020 5,300 943 330 2,100 Malibu 2019 5,200 603 500 1,680 Sunny 2020 5,900 1,547 300 2,280
Blossom Greenhouses Ltd. signed a 15-year, 4.0%, $910,000 loan on September 30, 2024, to help finance a new state-of-the-art greenhouse with an associated renewable energy source. The loan terms provide for semi-annual payments of $40,631 principal and interest. Payments are due on March 31 and September 30. The company's year end is September 30. (a) Your Answer Correct Answer Your answer is correct. Prepare an instalment payment schedule for the first two years. (Round answers to 0 decimal places, e.g. 5,255.) Semi-Annual Interest Period Cash Payment Interest Expense Reduction of Principal Principal Balance 910,000 Sept. 30, 2024 40631 18200 22431 887569 Mar. 31, 2025 Sept. 30, 2025 40631 17752 22879 864,690 40631 17294 23337 841353 Mar. 31, 2026 Sept. 30, 2026 40631 16827 23804 817549 SUPPO (b) Record the receipt of the loan on September 30, 2024. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No…
Consider the financial data for a project given in the table below. Initial investment Project life Salvage value Annual revenue $70,000 6 years $10,000 $26,000 Annual expenses $7,000 (a) What is i for this project? 18.1 % (Round to one decimal place.) (b) If the annual expense increases at a 7% rate over the previous year's expenses, but the annual income is unchanged, what is the new / - 16 % (Round to one decimal place.) (c) In part (b), at what annual rate will the annual income have to increase to maintain the same i obtained in part (a)? The annual income has to increase at% per year (Round to one decimal place.)
onsider the following financial informationabout a retooling project at a computer manufacturing company:• The project costs $2.5 million and has a five-yearservice life.• The retooling project can be classified as sevenyear property under the MACRS rule.• At the end of the fifth year, any assets held for theproject will be sold. The expected salvage valuewill be about 10% of the initial project cost.• The firm will finance 40% of the project moneyfrom an outside financial institution at an interestrate of 10%. The firm is required to repay the loanwith five equal annual payments.• The firm’s incremental (marginal) tax rate on theinvestment is 35%.• The firm’s MARR is 18%.With the preceding financial information,(a) Determine the after-tax cash flows.(b) Compute the annual equivalent worth for thisproject.
If the current value of a chemical plant is $ 800 thousand, its scrap value is $ 50 thousand, the service life is 8 years, the interest rate is 7%, the depreciation value and book value for each year,a) Calculate using the accumulated fund method.b) Show depreciation and book value changes by years on the chart.
A3) Finance A property can be purchased in cash or through an equivalent plan, over 20 years, consisting of equal monthly payments (before monetary correction), at the effective rate of 8.60% per year. Monetary correction is made monthly, using the reference rate (RT). Throughout this period, the monthly average RT was 0.60%. Knowing that the twentieth installment was $2170 (after monetary correction), obtain the cash value of the property.
Depreciation A firm is evaluating the acquisition of an asset that costs $69,800 and requires $3,830 in installation costs. If the firm depreciates the asset under MACRS, using a 5-year recovery period (see table 9), determine the depreciation charge for each year. Data Table The annual depreciation expense for year 1 will be $ (Round to the nearest dollar.) The annual depreciation expense for year 2 will be $ (Round to the nearest dollar.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a The annual depreciation expense for year 3 will be $ (Round to the nearest dollar.) spreadsheet.) The annual depreciation expense for year 4 will be $ (Round to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes The annual depreciation expense for year 5 will be $ Percentage by recovery year* 5 years (Round to the nearest dollar.) Recovery year 3 years 7 years 10 years The…

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

College Accounting (Book Only): A Career Approach

Accounting

ISBN:

9781337280570

Author:

Scott, Cathy J.

Publisher:

South-Western College Pub

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

College Accounting (Book Only): A Career Approach

Accounting

ISBN:

9781337280570

Author:

Scott, Cathy J.

Publisher:

South-Western College Pub

Income Tax Fundamentals 2020

Accounting

ISBN:

9780357391129

Author:

WHITTENBURG

Publisher:

Cengage

SEE MORE TEXTBOOKS