A corporation purchased a machine for $60,000 four years ago. It had an estimated life of 10 years and an estimated salvage value of $9,000. The current BV of this machine is $34,500. If the current MVof the machine is $42,000 and the effective income tax rate is 22%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Choose the correct answer below. OA. $42,000 O B. $32,760 OC. $40,350 O D. $43,650 OE. $36,390

A corporation purchased a machine for $60,000 four years ago. It had an estimated life of 10 years and an estimated salvage value of $9,000. The current BV of this machine is $34,500. If the current MVof the machine is $42,000 and the effective income tax rate is 22%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Choose the correct answer below. OA. $42,000 O B. $32,760 OC. $40,350 O D. $43,650 OE. $36,390

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 9P

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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.
Garrison Corporation is considering the replacement of an old machine that is currently being used. The old machine has a book value of $28,000. If Garrison decides to replace the old machine, Picco Company has offered to purchase it for $60,000 on the replacement date. Garrison has a tax rate of 40%. What is the after-tax cash flow associated with the salvage ofthe old machine? A. $32,000B. $36,000C. $47,200D. $40,800
Acorporation purchased a machine for $60,000 five years ago. It had an estimated life of 10 years and an estimated salvage value of $9,000. The current BV of this machine is $34,500. If the current MV of the machine is$40,500 and the effective income tax rate is 29%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Solve, (a) $28,755 (b) $40,500 (c) $38,760 (d) $37,455 (e) $36,759
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A company is considering replacing an existing machine with a more moden one. Here are some of the details: The tax rate is 40%. Assume straight-line depreciation and a RRR of 10%. Assume the salvage value of the investment is equal to zero when calculating the depreciation charge. O Find the NPV associated with the project Old Machine New Machine $1,000,000 (7 years ago) $1,500,000 $200,000 $300,000 $0 (3 years from now) Purchase Price Market Value $1,500,000 $1,500,000 $100,000 (10 years from now) Book Value Salvage Value Age Original Life Yearly capacity Sales Price 7 10 10 55,000 units $7/unit 90,000 units $7/units Yearly expenses $100,000 $90,000 Training expenses Inventory not applicable $5,000 $30,000 $75,000
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