On January 1, 2024, Nash Company, a small machine-tool manufacturer, acquired for $1,190,000 a piece of new industrial equipment. The new equipment had a useful life of 5 years, and the salvage value was estimated to be $72,200. Nash estimates that the new equipment can produce 12,000 machine tools in its first year. It estimates that production will decline by 1,140 units per year over the remaining useful life of the equipment. The following depreciation methods may be used: (1) straight-line, (2) double-declining-balance, (3) sum-of-the-years'-digits, and (4) units-of-output. For tax purposes, the class life is 7 years. Use the MACRS tables for computing depreciation. (a1) Compute accumulated depreciation under the following methods: (1) straight-line, (2) double-declining-balance, (3) sum-of-the- years-digits, and (4) units-of-output for the 3-year period ending December 31, 2026. Ignore present value, income tax, and deferred income tax considerations. (Round cost per unit to 2 decimal places, e.g. 25.12 and final answers to 0 decimal places, e.g. 5,125.)

Special Instrument company is considering replacing its machine with a new model that sells for $40,000, the cost of installation is $6,000. The old machine has been fully depreciated and has a $2500 salvage value. The new machine will be depreciated as a 3-year MACRS asset. Revenues are expected to increase $18,000 per year over the 5-year life of the new machine. At the end of 5 years the new machine is expected to have a $1500 salvage value. What is the NPV for this project if Special Instrument has a required rate of return of 12% and a marginal tax rate of 35%? Operating costs are not expected to increase from the current level of $8,000 per year. Briefly Discuss if you accept or reject the new machine and why.

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A small factory is considering replacing its existing coining press with a newer, more efficient one. The existing press was purchased five years ago at a cost of $200,000, and it is being depreciated according to a 7-year MACRs depreciation schedule and the first five years of depreciation have been taken (see below for MACRs chart). The CFO estimates that the existing press has 6 years of useful life remaining. The purchase price for the new press is $306,000. The installation of the new press would cost an additional $24,000, and this cost would be capitalized and added to the depreciable base rather than expensed immediately. The new press (if purchased) would be depreciated using the 7-year MACRs depreciation schedule. Interest expense associated with the purchase of the new press is estimated to be roughly $7,900 per year for the next 6 years. The appeal of the new press is that it is estimated to produce a pre-tax operating cost savings of $75,000 per year for the next 6 years,…

A company has decided to replace its inspection machine with an advanced one. The advanced machine costs $15,000 and will have operating costs of $3,600 in the first year, increasing by $2,000 per year thereafter. The expected salvage value of the new machine is $6,000 at the end of the first year and will decline by 10% of the preceding S.V. each year. Find the missing values in the following table and determine the economic life of the new machine. Total Cost (8%) CR (8%) OC (8%) 3,600 1 10,200 13,800 2 ? ? ... .... .. 3 4332.36 5,495.82 ? 4 ? 6,406.46 ? .......... . 3086.31 7,293.42 10,379.73 OPTIMAL n = A+ta ch Cilo

replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $42,900. The new equipment can be bought for $174,340, including installation. Over its 10-year life, it will reduce operating expenses from $190,000 to $145,400 for the first six years, and from $203,600 to $193,600 for the last four years. Net working capital requirements will also increase by $20,200 at the time of replacement. It is estimated that the company can sell the new equipment for $24,400 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 9%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the…

Chesterfield Constructions Ltd owns a crane which is used based on contract for many construction projects. The entity purchased the crane in April 2015 at a cost of $2,200,000. The manager estimates that the crane will work on average for 250 days each year for 10 years and then it would be sold at an estimated residual price of $200,000. By 30 June 2020 the crane had worked for 1,200 days.In July 2020 the motor of the crane started to shudder and lose power. An assessment of the crane’s motor resulted in repairs that were required to maintain the motor at its normal efficiency. The cost of $6,000 comprised labour of $4,000 and replacement parts of $2,000. The repairs were completed by the end of July 2020. The management decided that the cost would be regarded as a capital cost. At the same time management estimated that the crane would now be used for a total of 3,000 days with an estimated residual value of $90,000. In the remainder of the financial year to 2021 the crane worked…

New Style Corporation is a company that manufactures and sells chairs. On 1/1/20, the company purchases a piece of manufacturing equipment for $3,100,000 cash. The expected residual value is $200,000 and the useful life is 5 years. The company expects to produce 5,000,000 chairs with the equipment – 1,200,000 chairs in 2020; 1,400,000 chairs in 2021; 1,000,000 chairs in 2022; and 600,000 chairs 2023; and 800,000 chairs in 2024. Show your work. Round per unit to the nearest cent. Assume that New Style Corporation uses the Units-of-Activity method of depreciation.

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 $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%.   If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the nearest dollar.$…

The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $250,000. The old machine is being depreciated by $110,000 per year, using the straight-line method. The new machine has a purchase price of $1,100,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $160,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $245,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC. a. What initial cash…