Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some ofthat older equipment will become unnecessary when the company goes into production of its new product. Theobsolete equipment, which originally cost $40 million, has been depreciated straight-line over an assumed tax life of5 years, but it can be sold now for $18 million. The firm's tax rate is 30%. What is the after-tax cash flow from the saleof the equipment?Note: Enter your answer in millions rounded to 2 decimal places.After-tax cash flowmillion

Selling Price of Equipment$18,000,000Original cost of equipment$40,000,000Estimated life5 yearsTax…

Answered: Quick Computing installed its previous…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...

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Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $41.50 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.30 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment?
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $43.00 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.60 million. The firm's tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.) After-tax cash flow million
Quick Computing Installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $36.00 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $17.20 million. The firm's tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? Note: Enter your answer in millions rounded to 1 decimal place. After-tax cash flow million
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $35.00 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $17.00 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.)
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $37.00 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $17.40 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.) After-tax cash flow
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Markov Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. The firm expects that this equipment will have a useful life of five years, and its corporate tax rate is 20%. The company plans to use straight-line depreciation. a. What is the annual depreciation expense associated with this equipment? b. What is the annual depreciation tax shield? c. Rather than straight-line depreciation, suppose Markov will use the MACRS depreciation method for five-year property. Calculate the depreciation tax shield each year for this equipment under this accelerated depreciation schedule. d. If Markov has a choice between straight-line and MACRS depreciation schedules, and its marginal corporate tax rate is expected to remain constant, which should it choose? Why? e. How might your answer to part (d) change if Markov anticipates that its marginal corporate tax rate will change substantially over the next five years? a. What is the annual…
Daily Enterprises is purchasing a $9.7 million machine. It will cost $54,000 to transport and install the machine. The machine has a depreciable life of 55 years and will have no salvage value. The machine will generate incremental revenues of $4.2 million per year along with incremental costs of $1.1 million per year. If Daily's marginal tax rate is 20%, what are the incremental earnings (net income) associated with the new machine?
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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 generate incremental revenues of $4.2 million per year along with incremental costs of $1.2 million per year. If Daily's marginal tax rate is 28%, what are the incremental earnings (net income) associated with the new machine?

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