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&J Industries is considering a new project. Prior to making this decision, the company hired a consultant, at a cost of $24,160, to determine the viability of this new project. The project will require $286,600 for the purchase of the new machine. There will be $11,000 in delivery charges and $1,550 will be spent on a technician to calibrate the machine. The plan is to set up the new machine on land that the company currently owns. The land was purchased many years ago for $10,000 and currently has a market value of $30,000.
The new project will require an additional $1,300 in inventory, $970 in accounts receivables and accounts payable is expected to increase by $1,000. The new machine belongs in a 30% CCA class. Because the industry is changing rapidly, the equipment will be obsolete in 5 years with no salvage value. The net working capital will return to its original levels at the end of the project. The project is expected to generate additional revenues of $40,200 and expenses are expected to increase by $4,720. The tax rate is 40% and the required
What is the capital cost allowance in the first year?
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- Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $145,000, a life of 8 years, a $13500 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $11000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $26 per day per dumpster. An estimated 26 construction sites will need debris storage throughout the average year. If the minimum attractive fate of return is 10% per year, how many days per year must the equipment be required to justify its purchase? The number of days per year the equipment must be required is determined to be [1. Johnson Products is considering purchasing a new milling machine that costs $100,000. The machine's installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Johnson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Johnson's marginal tax rate is 40 percent. a. Calculate the project's net investment (NINV) b. Calculate the annual straight-line depreciation for the project.WTF Ltd is considering replacing its old fully depreciated forklift with a new model. Two months ago, WTF paid LMAO Consulting $14,000 in consulting fees to help them evaluate the various forklifts on offer. Your manager suggests this consulting fee be spread over the life of the project. The cost of the recommended forklift is $52,000. The consultants estimate the old forklift will be able to be sold today for a salvage value of $20,000. In addition, WTF has estimated it will need to increase its holdings of inventory from $7,000 to $36,000 at the start of the project. The company tax rate is 30%. What is the total cash flow at the start of the project (report your answer to the nearest dollar)?
- Alfred Home Construction is considering the purchase of five dumpsters and the transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $125,000, a life of 8 years, a $5000 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $2000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of $125 per dumpster per site and a daily charge of $20 per day per dumpster. An estimated 45 construction sites will need debris storage throughout the average year. If the minimum attractive rate of return is 12% per year, how many days per year must the equipment be required to justify its purchase?Maize Company is considering purchasing a new machine as a capital investment. The details of the new machine are summarized below: The cost of the machine will be $400,000. The machine has a useful life of five (5) years. The cost of the machine will be depreciated on a straight-line basis to a terminal disposal value of zero. The investment requires working capital of $30,000 upon purchase of the new machine. This working capital is expected to be fully recovered at the end of the project. The annual cost savings if the new machine is acquired will be $95,000. The machine’s salvage value at the end of five years is expected to be $15,000. Maize pays taxes at a rate of 35%. Maize has a required rate of return of 8%. a. Calculate the net present value (NPV) of the project (round your solution to dollars). Calculate the net present value (NPV) of the project (round your solution to dollars). What is the payback period of the project (round your solution to two decimal places)?…Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 12 years ago for $3,776,276 in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $3,278,390. An engineer was hired to study the land at a cost of $748,629, and her conclusion was that the land can support the new manufacturing facility. The company wants to build its new manufacturing plant on this land; the plant will cost $5,555,713 million to build, and the site requires $1,384,583 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
- Jonhson Products is considering purchasing a new milling machine that costs $100,000. The machine’s installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Jonhson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Jonhson’s marginal tax rate is 40 percent. a. Calculate the project’s net investment (NINV) b. Calculate the annual straight-line depreciation for the project.1. Jonhson Products is considering purchasing a new milling machine that costs $100,000. The machine’s installation and shipping costs will total $2,500. If accepted, the milling machine project will require an initial net working capital investment of $20,000. Johnson plans to depreciate the machine on a straight-line basis over a period of 8 years about a year ago, Jonhson paid $10,000 to a consulting firm to conduct a feasibility study of the new milling machine. Jonhson’s marginal tax rate is 40 percent.a. Calculate the project’s net investment (NINV)b. Calculate the annual straight-line depreciation for the project. 2. A new machine costing $100,000 is expected to save the MchKaig Brick Company $15,000 per year for 12 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 12-year period to an estimated salvage value of $0. The firm’s marginal tax rate is 40 percent. What are the annual net cash flows associated with the purchase of this…Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 5 years ago for $7,385,474 in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $3,944,875. An engineer was hired to study the land at a cost of $617,920, and her conclusion was that the land can support the new manufacturing facility. The company wants to build its new manufacturing plant on this land; the plant will cost $5,838,309 to build, and the site requires $994,648 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
- Sampson Corporation is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased two years ago at an installed cost of $60,000; it was being depreciated under MACRS, using a five year recovery period. The existing grinder is expected to have a usable life of five more years. The new grinder has a cost of $105,000 and requires $5,000 in installation costs; it has a five year usable life and would be depreciated under MACRS, using a five year recovery period. Sampson can currently sell the existing grinder for $70,000 without incurring any removal and cleanup costs. To support theincreased business resulting from the purchase of the new grinder, accounts receivable would increase by $40,000, inventories by $30,000 and accounts payable by $58,000. At the end of five years, the existing grinder would have a market value of zero; the new grinder would be sold to net $29,000 after removal and clean up costs and before…Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW)An engineer is working on the layout of a new research and experimentation facility. Two plant operators will be required. If, however, an additional $150,000 of instrumentation and remote controls were added, the plant could be run by a single operator. The total before-tax cost of each plant operator is projected to be $52,500 per year. The instrumentation and controls will be depreciated using the MACRS 5-year depreciation schedule.(a) Find the rate of return on the project, and the after tax payback period.(b) Based on a MARR of 15%, is this a desirable investment?