Win Corporation is considering replacing a machine with a book value of P400,000, a remaining useful life of 5 years, and annual straight-line depreciation of P80,000. The existing machine has a current market value of P400,000. The replacement machine would cost P550,000, have a 5- year life, and save P75,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the net investment required to replace the existing machine? * O P90,000 P150,000 P330,000 P550,000
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- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.
- Winneconne Company is considering replacing a machine with a book value of P400,000, a remaining useful life of 5 years, and annual straight-line depreciation of P80,000. The existing machine has a current market value of P400,000. The replacement machine would cost P550,000, have a 5-year life, and save P75,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method, the tax rate is 30%, inventory shall increase by P10,000, payables by P5,000, what would be the net investment required to replace the existing machine? a. P165,000 b. P160,000 c. P155,000 d. P150,000 e. P90,000Winneconne Company is considering replacing a machine with a book value of P400,000, a remaining useful life of 5 years, and annual straight-line depreciation of P80,000. The existing machine has a current market value of P400,000. The replacement machine would cost P550,000, have a 5-year life, and save P75,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method, the tax rate is 30%, inventory shall increase by P10,000, payables by P5,000, what would be the net investment required to replace the existing machine?Bata Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 5 years, and annual straight-line depreciation of P20,000. The existing machine has a current market value of P100,000. The replacement machine would cost P150,000, have a 5-year life, and save P50,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the net investment required, the annual net cash flows, and annual net incremental taxes, respectively?
- Bata Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 5 years, and annual straight-line depreciation of P20,000. The existing machine has a current market value of P100,000. The replacement machine would cost P150,000, have a 5-year life, and save P50,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the net investment required, the annual net cash flows, and annual net incremental taxes, respectively? Group of answer choices P150,000; P42,000; P8,000 P150,000; P34,000; P8,000 P50,000; P34,000; P16,000 P50,000; P42,000; P16,000Rose Company is considering replacing a machine with a book value of P200,000, a remaining useful life of 5 years, and annual straight-line depreciation of P40,000. The existing machine has a current market value of P200,000. The replacement machine would cost P300,000, have a 5-year-life, and save P100,000 per year in cash operating costs. The replacement machine would be depreciated using the straight-line method and the tax rate is 40%. What would be the increase in annual net cashflow if the company replaces the machine? Select one: a. P76,000 b. P60,000 c. P84,000 d. P68,000 Sampaguita Company is considering the sale of a machine with a book value of P80,000 and 3 years remaining it its useful life. Straight-line depreciation of P25,000 annually is available. The machine has a current market value of P100,000. What is the cash flow from selling the machine if the tax rate is 40%? Select one: a. P88,000 b. P92,000 c. P80,000 d. P100,000JKL Company is considering replacing a machine with a book value of P100,000, a remaining useful life of 4 years, and annual straight-line depreciation of P25,000. The existing machine has a current value of P80,000. The replacement machine would cost P160,000, have a4-year useful life, save P50,000 per year in cash operating costs. If there placement machine would be depreciated using straight-line method and the tax rate is 40%, what would be the increases in annual income taxes if the company replaces the machine? P21,000 P14,000 P32,000 P20,000
- Winneconne Company is considering replacing a machine with a book value of $400,000, a remaining useful life of 5 years, and annual straight-line depreciation of $80,000. The existing machine has a current market value of $400,000. The replacement machine would cost $550,000, have a 5-year life, and save $75,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 30%, what would be the net investment required to replace the existing machine?The Cap Company is considering the replacement of Machine A with Machine B that will cost P160,000 and will result in annual savings of P40,000 before income taxes because of the expected increase in operating efficiency. Machine B has an estimated useful life of 10 years and salvage value of P10,000. Machine A has a book value of P16,000 and a disposal value of P20,000 now.Straight-line depreciation is used and the company has an average income tax rate of 35%. The minimum desired rate of return on this investment is 20%. Use 3 decimal places for the PV factors. 1. Determine the Net Investment 2. Determine the annual cash flow net of income tax 3. What is the net present value of the investment?The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $59,000. The machine would replace an old plece of equipment that costs $15,000 per year to operate. The new machine would cost S7,000 per year to operate. The old machine currently In use could be sold now for a salvage value of $25,000. The new machine would have a useful life of 10 years with no salvage value. Requlred: 1. What Is the annual depreclation 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 consldered as 12.3%.) 1. Depreciation expense 2. Incremental net operating income Initial investment 4. Simple rate of return %