Daily Enterprises is purchasing a $9.6 million machine. It will cost $45,000 to transport and install the machine.The machine has a depreciable life of 5 years and will have no salvage value. The machine will generateincremental revenues of $4.2 million per year along with incremental costs of $1.2 million per year. If Daily'smarginal tax rate is 28%, what are the incremental earnings (net income) associated with the new machine?

Let's examine the incremental earnings (net income) resulting from the new machine in detail: 1.…

Answered: Daily Enterprises is purchasing a $9.6…

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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Michelle Amabo Company is planning to buy a new machine that can produce additional 20,000 units of product per year. The product sells for P50 each. The cost associated with the product is P30 per unit, exclusive of depreciation on the new machine. The new machine which is expected to last for 10 years will cost P500,000. No salvage value is expected to be recovered at the end of its life. The income tax rate is 35%. Required: 1. Accounting net income 2. Annual net cash inflows from the new machine.
Laurel's Lawn Care Limited has a new mower line that can generate revenues of $135,000 per year. Direct production costs are $45,000, and the fixed costs of maintaining the lawn mower factory are $17, 500 a year. The factory originally cost $0.90 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm's tax bracket is 25% . Note: Enter your answer in dollars not in millions.
Spectacular Flooring (SF) is a wood flooring wholesale company. SF is considering building a new inventory warehouse for $500,000. The warehouse would allow SF to increase their pre-tax cash flows by $100,000 each year. The company would plan to use the warehouse for 10 years before selling it for $200,000. The company uses straight-line depreciation. SF’s tax rate is 20%, and the required rate of return is 10%. What is the Net Present Value (NPV) of the proposed investment? Select one: a. $90,119 b. $77,108 c. ($55,591) d. $105,541 e. $19,517
Daily Enterprises is purchasing a $14,000,000 machine. The machine will depreciated using straight-line depreciation over its 10 year life and will have no salvage value. The machine will generate revenues of $8,000,000 per year along with costs of $3,000,000 per year. If Daily's marginal tax rate is 28%, what will be the cash flow in each of years one to 10 (the cash flow will be the same each year)? Enter your answer below rounded to the nearest whole number. Number
An asset with 5-year MACRS life will be purchased for $12,000. It will produce net annual benefits of$2500 per year for 6 years, after which time it will have a net salvage value of zero and will be retired.The company’s marginal tax rate is 26%. What is the after-tax rate of return?
HaulCo is considering the purchase of a truck. Over its five year life, it will provide net revenues of $17,000 per year at an initial cost of $72,000 and a salvage value of $21,000. HaulCo pays 35% in taxes, the CCA rate for trucks is 30%, and the after tax MARR is 12%. (a) What is the after tax annual cost or worth of this purchase? (b) Should HaulCo pursue this project? Why or why not?
Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $104,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,700 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine? Do not round intermediate calculations. Round your answer to the nearest cent. Negative value, if any, should be indicated by a minus sign. NPV=$?
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Proven Specialist will spend $850,000 on a piece of equipment that will manufacture fine wire for the electronics industries. The shipping and installation charges will be $220,000 and net working capital will increase to $28,000. The equipment will replace an existing machine that has a salvage value of $85,000 and a book value of $122,000. If Proven Specialist has a current marginal tax rate of 32 percent, what is the net investment?
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The New Energy Company is trying to decide whether to lease or buy a new computer- assisted control system for its business. Management has estimated that the new system will provide $2.9 million in annual pre-tax cost savings. The system costs $6 million and will be depreciated straight-line to zero over its five-year life, after which it will be worthless. The New Energy Company's tax rate is 22 percent and the firm can borrow at 9 percent. Golden Leasing Company has offered to lease the equipment to the New Energy Company for payments of $1,780,000 per year. Golden Leasing Company's policy is to require its lessees to make payments at the start of the year. Suppose Golden Leasing Company requires the New Energy Company to pay a $820,000 security deposit at the inception of the lease. a) Calculate the depreciation tax shield b) Calculate the aftertax lease payment c) Calculate the aftertax cost of debt d) Calculate the NAL with the security deposit. (Do not round intermediate…
The Wet Corp. has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $35,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 33%, what is the cash flow from the project in year 1? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Multiple Choice $23,400 $24,730 $23,950 $25,410

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