r Corporation is considering replacing a machine. The replacement will reduce operating expenses​ (that is, increase earnings before​ depreciation, interest, and​ taxes) by $24,000 per year for each of the 5 years the new machine is expected to last. Although the old machine has zero book​ value, it can be used for 5 more years. The depreciable value of the new machine is $60,000. The firm will depreciate the machine under MACRS using a 5​-year recovery, view table attached, and is subject to a 40% tax rate. Estimate the incremental operating cash inflows generated by the replacement.​  (Note: Be sure to consider the depre

Daily Enterprises is purchasing a $9.6 million machine. It will cost $46,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. If Daily uses​ straight-line depreciation, what are the depreciation expenses associated with this​ machine? The yearly depreciation expenses are ​$___________ ​(Round to the nearest​ dollar.)

International Soup Company is considering replacing a canning machine. The old machine is being depreciated by the straight-line method over a 10-year recovery period from a depreciable cost basis of $120,000. The old machine has 5 years of remaining usable life, at which time its salvage value is expected to be zero, and it can be sold now for $40,000. This machine has a current book value of $60,000.   The purchase price of the new machine is $250,000. Employees were sent to a training course last year on how to use the new machine; this training cost $5,000. The new machine has a 5-year life and an expected salvage value of $25,000. Annual savings of electricity, labor, and materials from use of the new machine are estimated at $40,000. The company is in a 40 percent tax bracket and its cost of capital is 16 percent. The MACRS depreciation method will be used and the recovery percentages for assets with a 5-year class life are given below: What is the initial cash outlay for the…

A company is thinking when to replace its old machine. It has two choices: replace the old machine now, or replace it at the end of seven years. Currently, the old machine has a salvage value of $3 million and book value of $1.5 million. If it is not sold, it will require maintenance costs of $770,000 at the end of the year over the nextsix years. The depreciation expense for the machine is $300,000 per year. At the end of six years, the machine will have a salvage value of only $100,000 and a book value of $0. If the company replaces the old machine now, the new machine will cost $4.9 million and will require maintenance costs of $320,000 at the end of each year during its six years economic life. At the end of six years, the new machine will have a salvage value of $900,000. It willbe fully depreciated using the straight-line method. If the company replaces the old machine in six years, a new machine will cost $3.5 million. The company will need to purchase this machine regardless of…

BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) years The investment Assuming the company has a required rate of return of 10%, determine whether the new machine…

Benson Enterprises is deciding when to replace its old machine. The machine’s current salvagevalue is $1.2 million. Its current book value is $1 million. If not sold, the old machine will requiremaintenance costs of $420,000 at the end of the year for the next five years. Depreciation on theold machine is $200,000 per year. At the end of five years, it will have a salvage value of $220,000.A replacement machine costs $3.5 million now and requires maintenance costs of $160,000 at theend of each year during its economic life of five years. At the end of five years, the new machinewill have a salvage value of $540,000. It will be fully depreciated using the three-year MACRSschedule. In five years a replacement machine will cost $4,000,000. Pilot will need to purchasethis machine regardless of what choice it makes today. The corporate tax is 35 percent and theappropriate discount rate is 10 percent. The company is assumed to earn sufficient revenues togenerate tax shields from…

Rockyford Company must replace some machinery that has zero book value and a current market value of $1,800. One possibility is to invest in new machinery costing $40,000. This new machinery would produce estimated annual pretax cash operating savings of $12,500. Assume the new machine will have a useful life of 4 years and depreciation of $10,000 each year for book and tax purposes. It will have no salvage value at the end of 4 years. The investment in this new machinery would require an additional $3,000 investment of net working capital. (Assume that when the old machine was purchased, the incremental net working capital required at the time was $0.) If Rockyford accepts this investment proposal, the disposal of the old machinery and the investment in the new one will occur on December 31 of this year. The cash flows from the investment are expected to occur over a four-year period. Rockyford is subject to a 40% income tax rate for all ordinary income and capital gains and has a 10%…