A new CNC machine is purchased for $40,000. The salvage value of the CNC machine is expected to be 15% of the initial cost. The CNC machine qualifies for 3-year GDS MACRS depreciation. What is the book value of the CNC machine after two years of depreciation

A new CNC machine is purchased for $40,000. The salvage value of the CNC machine is expected to be 15% of the initial cost. The CNC machine qualifies for 3-year GDS MACRS depreciation. What is the book value of the CNC machine after two years of depreciation

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Ten years ago, a contractor was able to purchase a crane whose capacity is 2000 tons costing P125 per ton. The life was estimated to be 15 years with a salvage value of 10% of the cost. A market has been found for the old crane for P80,000. If the depreciation has been figured on a straight line basis what is the difference between the depreciation book value of the old crane and its sale value. Final answer should be P20,000
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a. A new operating system for an existing machine is expected to cost $837,000 and have a useful life of six years. The system yields an incremental after-tax income of $245,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $105,000. b. A machine costs $570,000, has a $58,000 salvage value, is expected to last eight years, and will generate an after-tax income of $155,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by entering your answers in the tabs below. Required A Required B A new operating system for an existing machine is expected to cost $837,000 and have a useful life of six years. The system yields an incremental after-tax income of $245,000 each year after deducting its…
A new absorption chiller system costs $360,000 and will save $52,500 in each of the next 12 years. The asset is classified as a seven-year MACRS property for depreciation purpose. The expected salvage value is $20,000. The firm pays taxes at a combined rate of 40% and has an MARR of 12%. What is the net present worth of the system?(a) $46,725(b) $63,739(c) $62,112(d) $53,317
A computer system can be purchased for $18,000. The operating costs will be $10,000 per year, and the useful life is expected to be 5 years with a $5,000 salvage value at that time. The present annual sales volume should increase by $16,000 as a result of acquiring the system. Assume the company's tax rate is 50%. Using a straight-line deprecation method, compute annual taxes and IRR for the investment. Rework the previous problem assuming (i) the system's taxable life is 8 years with a salvage value of $2,000, but that (ii) the company still salvages the system after 5 years for $5,000. Describe how this may affect cash flow in the forthcoming years.
2. A new boiler was installed by a textile plant at a cost of P3,000,000 and projected to have a useful life of 15years. At the end of its useful life, it is estimated to have a salvage value of P300,000. Determine its capitalized cost if interest is 18% compounded annually.
A chemical mixer was purchased 8 years ago for $100,000. If retained, it will require an investment of $50,000 to upgrade it; if upgraded, it will cost $35,000/year to operate and maintain (O&M) and will have a negligible salvage value after 5 years. A new mixer can be purchased for $120,000; it will have an annual O&M cost of $15,000 and a salvage value of $40,000 after 5 years. Alternatively, a mixer can be leased with 5 beginning-of-year lease payments of $20,000; O&M costs will be $18,000/year. If the mixer is replaced, the old mixer can be sold on the used equipment market for $15,000. Using an insider’s approach, what are (a) the EUAC of keeping the current mixer, (b) the EUAC of replacing with a new mixer, and (c) the EUAC of replacing with a leased mixer? The MARR is 10%.
The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,500 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $170,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the nearest dollar.$…
a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000.b. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
An automated assembly robot that cost $300,000 has a recovery period of five years with an expected $50,000 salvage value. If the MACRS depreciation rates for years 1, 2, and 3 are 20.0%, 32.0%, and 19.2%, respectively, what is the depreciation recapture, capital gain, or capital loss, provided the robot was sold after 3 years for $80,000?
You purchased a stamping machine that cost $60,000 five years ago. At that time, the machine was estimated to have a service life of five years with salvage value of $5,000. These estimates are still good. The property has been depreciated according to a seven-year MACRS property class. Now (at the end of year 5 from purchase) you are considering selling the machine at $10,000. What book value should you use in determining the taxable gains?(a) $10,000(b) $13,386(c) $16,065(d) $17,520
A machine costs P 7,350, has a life of 8 years and has a salvage value of P 350 at the end of 8 years. In how many years from now when you can sell the machine at P 2,294.44 if depreciation used is SYD Method?

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