Regal Industries is replacing a grinder purchased 5 years ago for $15,000 with a new one costing $25,000 cash. The original grinder is being depreciated on a straight-line basis over 15 years to a zero salvage value. Regal will sell this old equipment to a third party for $6,000 cash. The new equipment will be depreciated on a straight-line basis over 10 years to a zero salvage value. Assuming a 40% marginal tax rate, Regal’s net cash investment at the time of purchase if the old grinder is sold and the new one is purchased is (M) *   A. $19,000

Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $10,000 to install the machine and Builtrite will need to keep an extra $9,000 in inventory on hand due to the machine's efficiency. The current machine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. If the current machine were sold today, it could be sold for $45,000. In five years, the new machine is estimated to have a salvage value of $36,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine is expected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket. What is the terminal cash flow for the new machine? O $23.760 O $31,800 O $32,760

7) costs for the current machine. The current machine is based on older technology and has negligible market value. The purchase price of the new equipment is $500,000 and it is expected to last for 10 years. Its terminal salvage value is $50,000. Operating and maintenance (O&M) costs are estimated to be $20,000 for the first year. Thereafter, these O&M costs are expected to increase by $2,000 each year over the previous year's costs. MARR is 10% per year compounded annually. a) b) purchase this new equipment? Explain. EmKay, Inc. has decided to purchase new equipment because of the increasing maintenance Compute the present worth for this new equipment purchase. If the annual O&M costs for the current machine are $75,000, would you support the decision to

DeYoung Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $450,000 and a remaining useful life of 5 years. The current machine would be worn out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $135,000. The old machine is being depreciated by $90,000 per year for each year of its remaining life. If DeYoung doesn't replace the old machine, it will have no salvage value at the end of its useful life. The new machine has a purchase price of $775,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total,…

Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five-year life. At the end of four years, it is believed that the machine could be sold for $30,000. The current machine being used was purchased 3 years ago at a cost of $40,000 and it is being depreciated down to zero over its 5-year life. The current machine's salvage value now is $12,000. The new machine would increase EBDT by $56,000 annuall Builtrite's marginal tax rate is 34%. What is the TCF associated with the purchase of this new machine if it is sold at the end of year 4? Ⓒ$30,000 $23,880 $20,500 $19,800

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…

Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…

Which values am I supposed to use for the depreciation?

Sunland Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $122,000. 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 $40,100. The new equipment can be bought for $175,880, including installation. Over its 10-year life, it will reduce operating expenses from $193,900 to $145,000 for the first six years, and from $204,800 to $191,300 for the last four years. Net working capital requirements will also increase by $20,700 at the time of replacement. It is estimated that the company can sell the new equipment for $24,900 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…