9-24. In 2017, a certain manufacturing company has some existing semi-automated production equipment which they are considering replacing. This equipment has a present market value of $57,000 and a book value of $30,000. It has five more years of straight-line deprecia- tion available (if kept) of $6,000 per year, at which time its book value would be zero. The estimated market value of the equipment five years from now (in year 0 dollars) is $18,500. The market value escalation rate on this type of equipment has been averaging 3.2% per year. The total annual operating and maintenance (O & M) expense and other related expenses are averaging $27,000 per year. New automated replacement equipment would be leased. Estimated O & M and related company expenses for the new equipment are $12,200 per year. The annual leasing costs would be $24,300. The MARR (after-tax including inflation component) is 9%, the effective tax rate is 40%, and the study period is five years. Based on an after-tax, AS analysis, should the new equipment be leased? Use the IRR method. (Chapter 8. 9.9.9.10
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- Martin Corporation is considering an investment in new equipment costing $155,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the second year, and $90,000 every year thereafter until the fifth year. What is the payback period for this investment? The equipment has no residual value OA 3.22 years OB. 1.58 years OC. 4.22 years OD. 2.29 years CKIEIn 2017, a certain manufacturing company has some existing semi-automated production equipment which they are considering replacing. This equipment has a present market value of $57,000 and a book value of$30,000. It has five more years of straight-line depreciation available (if kept) of $6,000 per year, at which time its book value would be zero. The estimated market value of the equipment five years from now (in year 0 dollars) is $18,500. The market value escalation rate on this type of equipment has been averaging 3.2% per year. The total annual operating and maintenance (O & M) expense and other related expenses are averaging $27,000 per year. New automated replacement equipment would be leased. Estimated O & M and related company expenses for the new equipment are $12,200 per year. The annual leasing costs would be $24,300. The MARR (after-tax including inflation component) is 9%, the effective tax rate is 40%, and the study period is five years. Based on an after-tax,…A pharmaceutical company has some existing semiautomated production equipment that they are considering replacing. This equipment has a present MV of $55,000 and a BV of $30,000. It has five more years of straight-line depreciation available (if kept) of $6,000 per year, at which time its BV would be $0. The estimated MV of the equipment five years from now (in year-zero dollars) is $17,500. The MV rate of increase on this type of equipment has been averaging 3.2% per year. The total operating and maintenance and other related expenses are averaging $26,500 (A$) per year. New automated replacement equipment would be leased. Estimated operating and maintenance and related company expenses for the new equipment are $11,900 per year. The annual leasing cost would be $23,900. The after-tax MARR (with an inflation component) is 8% per year (im); t = 25%; and the analysis period is five years. Based on an after-tax, A$ analysis, should the replacement be made? Base your answer on the actual…
- Sumami Ink considers replacing its old machine. The old machine’s current market value is $2 million and its current book value is $1 million. If not sold, it will have a market value at the end of 5 years of $200,000 and a book value of zero. A replacement new machine costs $3 million, and at the end of the five years it will have a market value of $500,000, and will be fully depreciated by the straight‐line method. Assume that the asset class will be closed, and the corporate tax rate is 34%. What is the total investment cash flow in year 0 and the total investment cash flow by the end of year 5? Multiple Choice -$1000K & $198K respectively. -$3000k & $500k respectively. -$1000K & $300K respectively. -$1,340k & $300k respectively. -$1,340k & $198k respectively. -$5000k & $700k respectively.A pharmaceutical company has some existing semiautomated production equipment that they are considering replacing. This equipment has a present MV of $55,000 and a BV of $29,000. It has five Kmore years of straight-line depreciation available (if kept) of $5,800 per year, at which time its BV would be 50. The estimated MV of the equipment five years from now in year-zero dollars) is $10,500 The MV rate of increase on this type of equipment has been averaging 3.7% per year. The total operating and maintenance and other related expenses are averaging $25,000 (AS) per year. New automated replacement equipment would be leased. Estimated operating and maintenance and related company expenses for the new equipment are $12,300 per year The annual leasing cost would be $24,300. The after-tax MARR (with an inflation component) is 12% per year ( 25%; and the analysis period is five years. Based on an after-tax, AS analysis, should the replacement be made? Base your answer on the actual IRR of…Apharmaceutical company has some existing semiautomated production equipment that they are considering replacing This equipment has a present MV of $55,000 and a BV of $33,000. It has five more years of straight-line depreciation available ( kept) of $6,600 per year, at which time its BV would be $0. The estimated MV of the equipment five years from now (in year-zero dollars) is $18,000. The MV rate of increase on this type of equipment has been averaging 4 2% per year. The total operating and maintenance and other related expenses are averaging $26,500 (AS) per year New automated replacement equipment would be leased. Estimated operating and maintenance and related company expenses for the new equipment are $11,900 per year. The annual leasing cost would be $24,100. The after-tax MARR (with an inflation component) is 10% per year (): -25%; and the analysis period is five years, Based on an after-tax, AS analysis, should the replacement be made? Base your answer on the actual IRR of…
- A pharmaceutical company has some existing semiautomated production equipment that they are considering replacing. This equipment has a present MV of $57,000 and a BV of $30,000. It has five more years of straight-line depreciation available (if kept) of $6,000 per year, at which time its BV would be $0. The estimated MV of the equipment five years from now (in year-zero dollars) is $18,500. The MV rate of increase on this type of equipment has been averaging 3.2% per year. The total operating andmaintenance and other related expenses are averaging $27,000 (A$) per year. New automated replacement equipment would be leased. Estimated operating and maintenance and related company expenses for the new equipment are $12,200 per year. The annual leasing cost would be $24,300. The after-tax MARR (with an inflation component) is 9% per year (im); t = 40%; and the analysis period is five years. Based on an after-tax, A$ analysis, should the replacement be made? Base your answer on the…Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $285,000, and it will produce eamings before depreciation and taxes of $92,000 per year for three years, and then $45,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 13 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value b. Based on the net present value, should Universal Electronics purchase the asset? O Yes O NoConsider a machine purchased one year ago for $18,000. The machine is being depreciated $3,000 per year throughout a six-year period. Its current market value is $6,000, and the expected market value of the machine one year from now is $4,000. If the interest rate is 10%, the expected cost of holding the machine during the next year is $___.
- Alpha Zeta is considering purchasing some new equipment costing $390,000. The equipment will be depreciated on a straight line basis to zero book value over the four year life of the project. Projected net income for the four years is $18,900; $21,300; $26,700; and $25,000. What is the average accounting rate of return?Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12–11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $245,000, and it will produce earnings before depreciation and taxes of $70,000 per year for three years, and then $39,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 13 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.)Food Harvesting Corporation is considering purchasing a machine for $1,718,750. The machine is expected to generate a constant after-tax income of $103,125 per year for 15 years. The firm will use straight-line(SL) depreciation for the new machine over 10 years with no residual value. What is the payback period for the new machine? (Round your answer to two decimal places.)