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- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Sunrise Furniture Inc. wants to upgrade the existing production process. The cost-cutting project can potentially reduce expenses by $665,000 per year. The project will require an initial investment in fixed assets of $1,268,000 that will be depreciated using the straight-line method to a zero book value over the 5-year life of the project. The company has a marginal tax rate of 23 percent. What is the depreciation tax shield at the end of year 2? A. $58,328 B. $411,400 C. $94,622 D. $253,600Builders Supply, Inc.is considering adding a new product line that is expected to increase annual sales by $367,000 and expenses by $256,000. The project will require $165,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 8-year life of the project. The company has a marginal tax rate of 34 percent. What is the depreciation tax shield?
- This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law.Landscapes Unlimited has spent $2,100 evaluating a new service area for expanding its business territory. The expansion will require the purchase of a new truck for $ 34,900 and fitting the truck with a flatbed that will cost $ 6,100 to install. The company would realize $ 8,250 in after-tax proceeds from the sale of an old truck. If Landscapes' working capital is unaffected by this project, what is the initial investment amount for this project?Arnold Inc. is considering a new project that requires use of an existing warehouse, which the firm acquired three years ago for $1 million and which it currently rents out for $121,000. Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront investment into machines and other equipment of $1.6 million. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $471,000. Finally, the project requires an initial investment into net working capital equal to 10% of predicted first-year sales. Subsequently, net working capital is 10% of the predicted sales over the following year. Sales of protein bars are expected to be $4.6 million in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses (excluding depreciation) are…
- Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $8,500 for each of the five years of the project's life. The equipment has an initial cost of $28,000 and belongs to a 25% CCA class. The company is in 30% tax bracket, the project's discount rate is 12%, and its salvage value is zero. The equipment will be sold to another company at the end of year 5 for $4,500. What is the project's profitability index (PI)? (Use the half-year rule when calculating the CCA Tax Shield. I.E use 0.5 instead of 1.5) a. 0.81 b. 0.84 C. 0.92 d. 0.98 e. 1.03A project to replace an old machine with a new one is under consideration. The new machine costs $12.000 and requires an additional working capital investment of $750. The old machine is expected to have a $750 salvage value. Calculate the Initial Outlay of this replacement project assuming the book value of the old asset is $1500. The firm's marginal tax rate is 50%. O None of the listed choices is correct O $11.287.50 O $12.037.50 O $12.112.50 O $11,625.00llana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.97 million. The lathe will cost $31,300 to run, will save the firm $127,700 in labour costs, and will be useful for 10 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25%. llana has many other assets in this asset class. The lathe is expected to have a 10-year life with a salvage value of $91,000. The actual market value of the lathe at that time will also be $91,000. The discount rate is 15% and the corporate tax rate is 35%. What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV $
- Rader Railway is determining whether to purchase a new rail setter, which has a base price of $394,000 and would cost another $58,000 to install. The setter will be depreciated according to the MACRS 3-year class of assets, and it would be sold after three years for $196,000. Using the setter requires a $26,000 increase in net working capital. Although it would have no effect on revenues, the setter should save the firm $171,000 per year in before-tax operating costs (excluding depreciation). Rader's marginal tax rate is 40 percent, and its required rate of return is 13 percent. Should the setter be purchased? Do not round intermediate calculations. Round your answer to the nearest cent. Use a minus sign to enter a negative value, if any. The setter **(SHOULD/SHOULD NOT)** be purchased because the net present value, that is (Greater than/Less than/Equal to) is zero. $Rader Railway is determining whether to purchase a new rail setter, which has a base price of $394,000 and would cost another $58,000 to install. The setter will be depreciated according to the MACRS 3-year class of assets, and it would be sold after three years for $196,000. Using the setter requires a $26,000 increase in net working capital. Although it would have no effect on revenues, the setter should save the firm $171,000 per year in before-tax operating costs (excluding depreciation). Rader's marginal tax rate is 40 percent, and its required rate of return is 13 percent. Should the setter be purchased? Do not round intermediate calculations. Round your answer to the nearest cent. Use a minus sign to enter a negative value, if any. The setter_____________ be purchased because the net present value, that is $__________ , is ______ zero.Pulaski Starlight Inc. is evaluating a project. The project is expected to generated new sales of $1,718,798 and incur costs of $606,990 annually. The project will be depreciated using the MACRS approach. The equipment needed for the project will cost $4,495,137 and is considered to be a five year MACRS class. The company's tax rate is 28%. Given this information, what would be the project's third year operating cash flow? Answer in dollars and cents.