Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $4,000 a year over its full life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Year 0 1 2 3 5 FCF $ (25,000) $ 4,000
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- Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $46,000; it is now five years old, and it has a current market value of $21,500. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $23,000 and an annual depreciation expense of $4,600. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $3,000 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be? (Note that the $46,000 cost of the old oven is depreciated over ten years at $4,600 per year. The half-year convention is not used for…Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $47,000; it is now five years old, and it has a current market value of $22,000. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $23,500 and an annual depreciation expense of $4,700. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $26,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $2,900 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be? (Note that the $47,000 cost of the old oven is depreciated over ten years at $4,700 per year. The half-year convention is not used for…Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of the old oven was $ 30,000; it is now five years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $ 15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before - tax cash savings from the new oven are $4,000 a year over its full life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be? Year 0 year 1 year 2 year 3 year 4 year 5 year 6
- Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $4,000 a year over its full life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be?Mom's Cookies, Incorporated, is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $4,000 a year over its full life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate. What will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Year FCF 0 1 2 3 4 5Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $38,000; it is now five years old, and it has a current market value of $16,500. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $19,000 and an annual depreciation expense of $3,800. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $27,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $4,200 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate.What will the cash flows for this project be? (Note that the $38,000 cost of the old oven is depreciated over ten years at $3,800 per year. The half-year convention is not used for…
- Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $45,000; it is now five years old, and it has a current market value of $20,000. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $22,500 and an annual depreciation expense of $4,500. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $3,400 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent. Assume a 21 percent tax rate.What will the cash flows for this project be? (Note that the $45,000 cost of the old oven is depreciated over ten years at $4,500 per year. The half-year convention is not used for…Dell is considering replacing one of its material handling systems. The old system was purchased 7 years agofor $130,000 and was depreciated as MACRS-GDS 5-year property since the system is used in the manufactureof electronic components. It has an annual O&M cost of $48,000, a remaining operational life of 8 years, and anestimated salvage value of $6,000 at that time. A new system can be purchased for $175,000. It will be worth$50,000 in 8 years, and it will have annual O&M costs of only $17,000 per year due to new technology. If thenew system is purchased, the old system will be traded in for $55,000, even though the old system can be sold536 CHAPTER 11 / REPLACEMENT ANALYSISfor only $45,000 on the open market. Leasing a new system will cost $31,000 per year, payable at the beginningof the year, plus operating costs of $15,000 per year payable at year-end. If the new system is leased, theexisting material handling system will be sold for its market value of $45,000.Use an…Freida Company is considering an asset replacement project of replacing a control device. This old control device has been fully depreciated but can be sold for $5,000. The new control device, which is more automated, will cost $42,000. The new device’s installation and shipping costs will total $16,000. The new device will be depreciated on a straight-line basis over its 2-year economic life to an estimated salvage value of $0. The actual salvage value of this device at the end of 2-year period (That is, the market value of the device at the end of 2-year period) is estimated to be $4,000. If the replacement project is accepted, Freida will require an initial working capital investment of $2,200 (that is, adding $2,200 initially to its net working capital). During the 1st year of operations, Freida expects its annual revenue to increase from $72,800 to $90,000. After the 1st year, revenues from the replacement are expected to increase at a rate of $2,800 a year for the remainder of…
- Brown Company is considering the purchase of a new machine to replace an existing one. The old machine was purchased 3 years ago at a cost of $3,000, and it is being depreciated on a straight-line basis to a zero salvage value over a 6-year life. The current market value of the old machine is $2,000. The new machine, which falls into the MACRS 3-year class, has an estimated life of 3 years, it costs $5,000, and Brown plans to sell the machine at the end of the fifth year for $200. The applicable depreciation rates are 0.33, 0.45, 0.15, and 0.07. The new machine is expected to generate before-tax cash savings of $500 per year. The company's tax rate is 40 percent. if the firm’s cost of capital is 14 percent, what is the NPV of the proposed project?Your company is considering the purchase of a new machine. The original cost of the old machine was $75,000; it is now five years old, and it has a current market value of $35,000. The old machine is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $37,500 and an annual depreciation expense of $7,500. The old machine can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new machine whose cost is $80,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new machine are $15,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a five-year life, and the cost of capital is 15 percent. Assume a 21 percent tax rate. What will the year 1 operating cash flow for this project be? ultiple Choice $16,600 $4,480 $3,940 $13,635Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $2,400,000. Its current book value is $1.475,000. If not sold, the old machine will require maintenance costs of $645,000 at the end of the year for the next five years. Depreciation on the old machine is $295,000 per year. At the end of five years, it will have a salvage value of $90,000 and a book value of $0. A replacement machine costs $4,000,000 now and requires maintenance costs of $315,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $680,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,000,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 22 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…