The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 8%.
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- Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins’ cost of capital is 14%. Should the firm replace its old knitting machine? If so, which new machine should it use? By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine?The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 8%. Year 0 1 2 3 4 5 Annual Operating Cash Flow Salvage Value -$22,500 6,250 6,250 6,250 6,250 6,250 a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number. years -Select- ✓ b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? I. No. Salvage possibilities could only raise NPV and IRR. II. Yes. Salvage possibilities could only lower NPV and IRR. III. Salvage possibilities would have no effect on NPV and IRR. $22,500 17,500 14,000 11,000 5,000 0The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 10%. Year Annual Operating Salvage ValueCash Flow________________________________________________ 0 (22,500) 22,5001 6,250 17,5002 6,250 14,0003 6,250 11,0004 6,250 5,0005 6,250 0 a. Should the firm operate the truck until the end of its 5-year physical life, or, if not, what is its optimal economic life? b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? Explain
- The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 11 percent. Year Annual Operating Cash Flow Salvage Value 0 1 2 3 4 5 -$22,500 6,250 6,250 6,250 6,250 6,250 $22,500 17,500 14,000 11,000 5,000 0 a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number. years b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? I. Salvage possibilities would have no effect on NPV and IRR. II. No. Salvage possibilities could only raise NPV and IRR. III. Yes. Salvage possibilities could only lower NPV and IRR. -Select-vThe Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $23,500, and it is expected to generate after-tax cash flows of $7,250 per year. The truck has a 5-year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given below. The company's WACC is 8%. After-Tax Year 0 Annual After-Tax Cash Flow Abandonment Value ($23,500) 1 7,250 2 7,250 3 7,250 7,250 $17,500 15,000 13,000 8,000 7,250 4 5 a. What is the truck's optimal economic life? Round your answer to the nearest whole number. year(s) b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? -Select- vThe Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $21,500, and it is expected to generate after-tax cash flows of $6,000 per year. The truck has a 5-year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given below. The company's WACC is 11%. Year 0 1 2 3 Annual After-Tax Cash Flow ($21,500) 6,000 6,000 6,000 4 5 After-Tax Abandonment Value $17,500 15,000 13,000 7,000 0 6,000 6,000 a. What is the truck's optimal economic life? Round your answer to the nearest whole number. year(s) b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
- TXY Inc, recently purchased a new delivery truck. The new truck cost $25,000., and it is expected to generate net after-tax operating cash flows of $7, 500 per year. The truck has a 4-year expected life. The expected salvage values after tax adjustments for the truck are as follows. Year Annual Operating Cash Flow Salvage Value 0 25,000 25,000 17,500 19,500 2 7, 500 15,000 3 7,500 13,000 4 7,500 0 The company's cost of capital is 10%. Should the firm operate the truck until the end of its 4-year physical life? If not, then what is the optimal economic life? Make sure you show the NPV for various economic life? Please explain and use finance calculator to solveLakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $33,000. Lakeside's cost of capital is 7%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.) Payback period Accounting rate of return years %APJ, Inc. is planning to purchase a new machine that will take six years to recover the cost. The new machine is expected to produce cash flow from operations, net of income taxes, of P4,500 a year for the first three years of the payback period and P3,500 a year of the last three years of the payback period. Depreciation of P3,000 a year shall be charged to income of the six years of the payback period. How much shall the machine cost? * A. P12,000 B. P18,000 C. P24,000 D. P36,000
- Johnson Wholesale Corporation has purchased a new piece of equipment for $644,000, with $46,000 of that total being costs for installation. After discussions with its accounting firm the company plans to depreciate the installation costs straight-line over 5 years. The cost of capital is 7.5% and the Tax Rate is 22%. Rounded to the nearest dollar, what is the present value of the cost of the equipment?Rooney, Incorporated is considering the purchase of a new machine costing $700,000. The machine's useful life is expected to be 8 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after-tax cash flow is expected to be $156,000. Rooney estimates its cost of capital to be 12%. (The present value of a $1 annuity for 8 years at 12% is 4.968, and the present value of $1 to be received in 8 years is 0.404.) The net present value of the investment in the machine under consideration is: Multiple Choice $156,000. $75,008. $87,500. $126.800.A new investment project requires a purchase of a new equipment with a cost of $575,000 , which will be depreciated straight-line to zero over its 4-year life. The investment lasts for four years, and will bring in an annual operating cash flow of $215,000. At the end of the four years, the equipment will be sold and result in an after tax salvage value of $25,000 . The investment will require an investment of working capital of $15,000 , initially and will be fully recovered at the end of year four. Assume the discount rate is 15 percent and the tax rate is 28 percent. What is last year's cash flow from the project?