You manufacture car parts using equipment and direct labor. Youare planning to buy a new machine for $1,000. The machine willgenerate net cash flows of $250 a year for 10 years. The salvagevalue after 10 years is zero. Compute ARR (accounting rate ofreturn).O 50%O 15%25%30%O not enough information - need to know accounting income andaccounting depreciation

Direct labor is a crucial component in the calculation of the cost of goods sold (COGS) for…

Answered: You manufacture car parts using…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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How do I work out this problem? It is published by Flatworks the course is Financial Management Chapter 7. Thank you in advance. A new delivery truck can be purchased for $30,000. The old one could be sold day for $5,000, and has a book value of $3,000. In three years, the old truck will have a salvage value of $1,000 (and no book value). The new truck would be depreciated on a 5-year MACRS schedule. The firm’s tax rate is 21%. Assume the remaining book value of the old truck will be depreciated in year 1, and that the new truck will have a salvage value of $10,000 in year 3. a. What are the appropriate capital spending items to include in a capital budgeting analysis for the decision to purchase the new truck (assuming the old one would be sold to make room in the garage)? b. What are the appropriate operating cash flows to consider for the first three years? c. If the new truck will also save the firm $1,000 a year in gas expenses, what are the appropriate operating cash flows for…
A machine costing $5000 has an accumulated depreciation of $3000 and the rate of depreciation is 20%. What will be the current depreciation using reducing balance method? 600 3000 200 400
don't use excel also can you show me maths solving with equation by hand please....
Economics Can you solve it manually, please.? A bank purchased a new computer information system which cost them $350,000. Suppose this is considered a 5-year MACRS property. The system can be salvaged for about $40,000 at the end of ten years. (a) What are the annual depreciation values for tax purposes over the system's useful life? (b) What is its book value at the end of year 2 for tax purposes?
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $160,000 today. It will be depreciated on a straight-line basis over 10 years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $40,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $25,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,909 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 20%, and the opportunity cost of capital for this type of equipment is 10%. Is it profitable to replace the…
A company is considering replacing an existing machine with a more moden one. Here are some of the details: The tax rate is 40%. Assume straight-line depreciation and a RRR of 10%. Assume the salvage value of the investment is equal to zero when calculating the depreciation charge. O Find the NPV associated with the project Old Machine New Machine $1,000,000 (7 years ago) $1,500,000 $200,000 $300,000 $0 (3 years from now) Purchase Price Market Value $1,500,000 $1,500,000 $100,000 (10 years from now) Book Value Salvage Value Age Original Life Yearly capacity Sales Price 7 10 10 55,000 units $7/unit 90,000 units $7/units Yearly expenses $100,000 $90,000 Training expenses Inventory not applicable $5,000 $30,000 $75,000
1.
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The term depreciation refers to how the value of an asset (such as a car) decreases over time. There are several different approaches for calculating depreciation. Part A: In the straight-line method of calculating depreciation, the value of the item is reduced by the same amount each year. Suppose a company purchases a car for $24000. Using straight-line depreciation, the value of the car may be reduced by $2500 each year. Determine a formula for S(t), the value of the car t years after purchase. Answer: Part B: After five years, the value of the car, using the straight-line method, will be $ Part C: After twelve years, the value of the car, using the straight-line method, will be Part D: In the declining balance method of depreciation, the value of the item is reduced by the same percentage each year. Suppose the $24000 car is depreciated at a rate of 14% each year. Determine a formula for D(t), the value of the car t years after purchase. Answer: Part E: After five years, the value…
1 A new backhoe costs Bob the Builder $X. It is expected to have a salvage value of $Y after N years. What rate of depreciation for the declining-balance method should Bob be using? X= Y= N= Depreciation Rate $750,000 $58,000 29 years Try Again What is the Book Value after 25 years? Try Again (Use unrounded rate)
You purchase a new pizza oven for $9,950 which will have a scrap value of $900. Assuming a 35% depreciation rate, how much depreciation would you recognize in year one when using the Double Declining Balance depreciation method? $2,810 $3167.50 $3482.50 $3.572.75

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