starset machine shop is considering a 4-year project to improve its production efficiency. buying a new machine press conf $475,000 is estimated to result in $199,000 in annual pretax cost savings. the press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of 72,000. The press also requires an initial investment in spare parts inventory of 38,000 along with an additional 4000 in inventory for each succeeding year of the project. the shops tax rate is 23 percent and its discount rate is 10 percent. calculate the NPV of this project.

The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $26,000. The new machine would have a useful life of 10 years with no salvage value. Required: 1. What is the annual depreciation expense associated with the new bottling machine? 2. What is the annual incremental net operating income provided by the new bottling machine? 3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return? 4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%) 1. Depreciation expense 2. Incremental net operating income 3. Initial investment 4.…

Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: Machine A could be purchased for $54,000. It will last 10 years with annual maintenance costs of $1,700 per year. After 10 years the machine can be sold for $5,670. Machine B could be purchased for $45,000. It also will last 10 years and will require maintenance costs of $6,800 in year three, $8,500 in year six, and $10,200 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase?

Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…