Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $11.5 million, of which 65% has been depreciated. The used equipment can be sold today for $4.6 million,and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to thenearest dollar.$

Original Cost = $11,500,000Depreciation = $11,500,000 × 65% = $7,475,000Book Value = Orginal Cost -…

Answered: Allen Air Lines must liquidate some…

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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firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%, and its after-tax MARR is 18%. What is the present worth of the project?
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.
Karsted Air Services is now in the final year of a project. The equipment originally cost $27 million, of which 80% has been depreciated. Karsted can sell the used equipment today for $6.75 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?
Consider an asset that costs $700,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $151,000. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset? Aftertax salvage value=
One year ago, your company purchased a machine used in manufacturing for $95,000. You have learned that a new machine is available that offers many advantages and that you can purchase it for $140,000 today. The CCA rate applicable to both machines is 30%; neither machine will have any long-term salvage value. You expect that the new machine will produce earnings before interest, taxes, depreciation, and amortization (EBITDA) of $45,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $20,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 45%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year-old machine? What is the NPV of replacement? The NPV of replacement is $. (Round to the nearest dollar.)
A road construction company is considering the purchase of a gravel hauler as it prepares for a new season of rural road construction. The hauler will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after-tax MARR is 9% and the corporate tax rate is 55%. a. What is the exact after-tax IRR for this purchase? b. What is the approximate after-tax IRR for this purchase? c. Should the company buy the gravel hauler? Why or why not?
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.)
Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $13.8 million, of which 75% has been depreciated. The used equipment can be sold today for $4.6 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $40,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $25,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,909 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 20%, and the opportunity cost of capital for this type of equipment is 10%. Is it profitable to replace the…
Hancheta Inc. is considering the purcase of a new vehicle for P350,000. The firm's old vehicle has a book value of P85,000, but can only be sold for P60,000. The new vehicle will be depreciated using a 5 year useful life and the straight line method. It is expected to save P62,000 after taxes from the reduced fuel and maintenance expenses. Tabletop Raul is in the tax bracket and has a 12% cost of capital. Compute for the accounting rate of return on initial investment.
It is being decided whether the company is buying a delivery truck worth 25000 USD, which can be rented out to other warehouses in your area. For a useful life of 15 yrs, it is projected that you can earn as much as 3100 USD. At the end of its useful life, the salvage value is zero. Disregarding taxes, the ROR is projected to be approximately equal to: 7.1% 6.5% 5.3% 4.2% Other:
Karsted Air Services is now in the final year of a project. The equipment originally cost $27 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $6 million, and its tax rate is 30%. What is the equipment's after-tax salvage value? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar.

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