What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Calculation of equivalent annual savings: Answer: Equivalent annual savings is $14,777.60…
Q: Markov Manufacturing recently spent $15 million to purchase some equipment used in the manufacture…
A: "Hi, Thanks for the Question. Since you asked multiple sub parts question, we will answer first…
Q: Your company is considering a new project that will require $250,000 of new equipment at the start…
A: Depreciation expense is tax deductible and over a period of the equipment life tax benefit can be…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Calculation of Annual Depreciation Tax Shield:
Q: Daily Enterprises is purchasing a $4.1 million machine. It will cost $66,000 to transport and…
A: Before investing in new asset or project, profitability is evaluated by considering future generated…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…
Q: what is the NPV of this project?
A: The difference between the current value of cash inflows and outflows is referred to as net present…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would…
A: Note: No intermediate rounding is done. Final answer is two decimal places.Depreciation for each of…
Q: Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $129,000 per year.…
A: Operating cash flow is the amount received by the business by performing their core business…
Q: A corporation is considering purchasing a machine that costs $120,000 andwill save $X per year after…
A: Saving after tax can be calculated by this formula. X= saving after tax .i = Interest rate .n=…
Q: Kelly, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect…
A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Computation:
Q: Ilana Industries Inc. needs a new lathe. It can buy a new high-speed lathe for $1.2 million. The…
A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…
Q: If the depreciation rates are 12% in Year 1 and 18% in Year 2, what is the depreciation tax shield…
A: Depreciation expense: Depreciation expense is the reduction in a particular asset due to its use or…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Equivalent annual savings is $10,226.31. Computation of equivalent annual savings: Excel spread…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: NPV means PV of net profit generates in future from the project. It can be simply calculated by…
Q: What is the equivalent annual saving from the purchase
A: Equivalent annual savings is the cost of operating and maintaining an asset annually. It is also…
Q: What are the Equivalent annual savings?
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product. The…
A: Net present value (NPV) is the distinction between the current estimation of money inflows and the…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product. The…
A: NPV is helpful in evaluation of any project. Positive NPV is a good indicator and increase the…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Calculation of equivalent annual savings: Answer: Equivalent annual savings is $4,080.11
Q: Your firm, Agrico Products, is considering a tractor that would have a cost of $36,000, would…
A: Hence, cash inflows from operation in scenario of 5 years life is $14,880.The cash flow after tax in…
Q: What is the NPV of Pigpen’s project?
A: Cost = 1230000 Depreciation for each of the 10 years would be $123000 ($1230000/10) using…
Q: A corporation is considering purchasing a machine that will save $200,000 per year before taxes. The…
A: The net present value is the difference of the present value of cash inflows and the present value…
Q: Daily Enterprises is purchasing a $10.5million machine. It will cost $46,000 to transport and…
A: Incremental earnings refers to additional savings from incremental net revenues. Incremental…
Q: Your company is considering a new project that will require $1 million of new equipment at the start…
A: Given, Cost of new equipment is $1 million Life of equipment is 10 years Depreciated value $150,000…
Q: Camber Corporation has to decide if they can finance purchasing 10 new machines for all their…
A: b)The positive effects of corporations increasing the amount paid upfront for the capital purchases…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Initial investment of the company is the sum of the cost of high pressure glueball plus after tax…
Q: The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for…
A: Given the information: Acquisition of a new automatic donut dropper: $600,000 Life of machine: 6…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Here, Purchase price of Glueball is $170,000 Selling Price of Old low-pressure glueball is $30,000…
Q: Scottech is examining an investment opportunity that will involve buying $120,000 worth of…
A: Equipment cost = 120,000 Net working capital = 10,000 Shipping cost = 5000 Installation cost = 10000…
Q: The TinX Corp. is investing in a machine which will increase the quality of their product.The…
A: Particulars Year 1 yYear 2 Year 3 Year 4 Sales 4,00,000 4,00,000 4,00,000 4,00,000 Less:-…
Q: A corporation is considering purchasing amachine that will save $150,000 per year beforetaxes. The…
A: Given: Saved amount per year = $150,000 Cost of operating = $30,000 Income tax rate = 40% Return of…
Q: Shunt Technology will spend $800,000 on a piece of equipment that will manufacture fine wire for…
A: Net investment is the total of all expenses which are incurred to operate or run the project. it…
Q: Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball…
A: Equivalent annual savings is the annual savings made by operating and maintaining the assets over…
Q: Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $171,000 per year.…
A: Formulas:
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Working Note #1 Computation of Net Cash Flow:: (Fig's in million $) Particulars Year 1 2 3…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: NPV is the difference between the present value of cash inflows and present value of initial…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: NPV means present value of benefits arises in future from the project. It can be simply calculated…
Q: 18
A: Initial cash outlay is the cost that was involved in the initial year during project investment.
Q: Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $135,000 per year.…
A: Given revenues =135,000 per year Direct production costs =$45,000 fixed costs =$17,500 a year…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Net present value or NPV as it is called, is the difference between the present value of cash…
Q: our firm, Agrico Products, is considering a tractor that would have a cost of $37,000, would…
A: NPV of the tractor when the useful life is 5 years:
Q: llana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $0.97 million. The…
A: NPV is method for determining the current value of the cash flows, which have been generated by the…
Q: United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make…
A: Formulas: Note: After tax salvage value refer high lighted part.
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low-pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $28,000 a year in expenses before tax. The opportunity cost of capital is 12%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of 170,000. The project will produce 1,000 cases of mineral water per year indefinitely, starting at Year 1. The Year-1 sales price will be 138 per case, and the Year-1 cost per case will be 105. The firm is taxed at a rate of 25%. Both prices and costs are expected to rise after Year 1 at a rate of 6% per year due to inflation. The firm uses only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has an indefinite life and will not be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its NPV.) What is the NPV? b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the projects NPV?Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 17 million, and production and sales will require an initial 5 million investment in net operating working capital. The companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for 1.5 million after taxes and real estate commissions. How would this affect your answer?
- Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?Wansley Lumber is considering the purchase of a paper company, which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 13%. Should Wansley purchase the paper company? Wansley realizes that the cash flows in Years 1 to 20 might be $30 million per year or $50 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 13%. Wansley can wait for 1 year and find out whether the cash flows will be $30 million per year or $50 million per year before deciding to purchase the company. Because of the nature of the purchase contract, if it waits to purchase, Wansley can no longer sell the company 2 years after purchase. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? If so, when? Again, assume that all cash flows are discounted at 13%.Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low- pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $28,000 a year in expenses before tax. The opportunity cost of capital is 12%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual savings
- Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $40,000 and sell its old low-pressure glueball, which is fully depreciated, for $6,000. The new equipment has a 10-year useful life and will save $10,000 a year in expenses before tax. The opportunity cost of capital is 12%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $70,000 and sell its old low-pressure glueball, which is fully depreciated, for $12,000. The new equipment has a 10-year useful life and will save $16,000 a year in expenses before tax. The opportunity cost of capital is 9%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. equivalent annual savings?Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $70,000 and sell its old low-pressure glueball, which is fully depreciated, for $12,000. The new equipment has a 10-year useful life and will save $16,000 a year in expenses before tax. The opportunity cost of capital is 9%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately.
- Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $50,000 and sell its old low-pressure glueball, which is fully depreciated, for $8,000. The new equipment has a 10-year useful life and will save $12,000 a year in expenses. The opportunity cost of capital is 10%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $220,000 and sell its old low-pressure glueball, which is fully depreciated, for $40,000. The new equipment has a 10-year useful life and will save $48,000 a year in expenses. The opportunity cost of capital is 10%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual savings=Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low- pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $28,000 a year in expenses. The opportunity cost of capital is 12%, and the firm's tax rate is 40%. What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation? Assume the new machine will have no salvage value. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual savings