are considering investing in a piece of equipment to mplement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $41.67 for each of the three years of the project's life. The equipment has an initial cost of $125 and belongs n a 20% CCA class. Assume a 34% tax bracket, a discount rate of 5%, and a salvage value of zero. f the equipment is sold to another company at the end of year 3 or $20, what is the Pl?

are considering investing in a piece of equipment to mplement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $41.67 for each of the three years of the project's life. The equipment has an initial cost of $125 and belongs n a 20% CCA class. Assume a 34% tax bracket, a discount rate of 5%, and a salvage value of zero. f the equipment is sold to another company at the end of year 3 or $20, what is the Pl?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...

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You are considering investing in a piece of equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $41.67 for each of the three years of the project's life. The equipment has an initial cost of $125 and belongs in a 20% CCA class. Assume a 34% tax bracket, a discount rate of 15%, and a salvage value of zero. If the equipment is sold to another company at the end of year 3 for $20, what is the PI? Multiple Choice 1.09 0.77 0.31
Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of$670,000at the end of the project's and assets ten year life. Ace's marginal tax rate is32%. The firm will have to pay$8,047,675to buy the asset. You have estimated that they could sell the asset for$787,309to a Brazilian firm at the end of the project. Answer in dollars and cents.
Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of $670,000 at the end of the project's and assets ten year life. Ace's marginal tax rate is 31%. The firm will have to pay $8,802,175 to buy the asset. You have estimated that they could sell the asset for $595,641 to a Brazilian firm at the end of the project. Answer in dollars and cents.
Consider an asset that costs $311,000 and is depreciated straight-line to zero over its six-year tax life. The asset is to be used in a four-year project; at the end of the project, the asset can be sold for $58,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? Can the calculator and excel solution be provided?
Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $8,500 for each of the five years of the project's life. The equipment has an initial cost of $28,000 and belongs to a 25% CCA class. The company is in 30% tax bracket, the project's discount rate is 12%, and its salvage value is zero. The equipment will be sold to another company at the end of year 5 for $4,500. What is the project's profitability index (PI)? (Use the half-year rule when calculating the CCA Tax Shield. I.E use 0.5 instead of 1.5) a. 0.81 b. 0.84 C. 0.92 d. 0.98 e. 1.03
A firm is looking at a new project requiring a machine that would cost $500,000.The cost will be depreciated straightline to zero over the project's 5yr life at the end of which the machoine can be scrapped for $125,000. the tax rate = 23%. Calculate the machine's after-tax salvage value.
Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent.Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.)
Your firm needs a machine which costs $190,000, and requires $34,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35% and a discount rate of 12%. If this machine can be sold for $19,000 at the end of year 3, what is the after tax salvage value?
A project requires initial asset investment of $1 million. The asset will last for 8 years, and will be depreciated for tax purposes at the CCA rate of 30%. The required return on this project is 16%, and the marginal corporate tax rate is 36%. Assuming that the asset will have a salvage value of $50,000 at the end of Year 8. what is the present value of the CCA tax shields from this project? Multiple Choice 204111.57 $215.009.97 $218.59071 $234.782.61
Your firm needs a machine which costs $280,000, and requires $43,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 21% and a discount rate of 13%. If this machine can be sold for $28,000 at the end of year 3, what is the after tax salvage value? Multiple Choice $26,477.08 $7,252.00 $22,120.00 $16,391
You are evaluating the proposed acquisition of a new crane. Its basic price is $150,000 and will cost another $30,000 to modify it for use by your firm. It falls into the MACRS 3 depreciation class, with applicable rates or 33%, 45%, 15%, and 7% annually. Your company plans to sell it after 3 years for $70,000. If your firm acquires the equipment, it will also have to increase its net operating working capital (for spare parts) by $6,000 per year. The equipment is not expected to increase revenues directly, but is expected to save the company $30,000 per year in before tax costs. The firm's tax rate is 40%. (a) What is the company's net investment if it acquires the earth mover? (b) What are the operating cash flows for years 1, 2, and 3? (c) What is the terminal cash flow? (d) If the project's cost of capital is 10%, should the crane be purchased?
b. Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.