EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 9, Problem 2P
Summary Introduction
To determine: The annual straight line depreciation.
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A company is planning to spend P60,000 for a machine which will be depreciated on a straight-line basis over 10 year period. the machine will generate additional cash revenues of P12,000 a year. It will incur additional costs except for depreciation. the income tax rate is 35%. Determine the accounting rate of return.
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Calculate the annual straight-line depreciation for a machine that costs $30,000 and has installation and shipping costs that total $2,000. The machine will be depreciated over a period of 15 years. The company’s marginal tax rate is 40 percent. Round your answer to the nearest dollar.
A firm is considering purchasing a machine that costs $56000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $45000 per year in labor, but it will incur $9000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 40%, and its after-tax MARR is 14%. Should the machine be purchased?
Chapter 9 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 9.A - Prob. 1QTDCh. 9.A - Prob. 1PCh. 9.A - Prob. 2PCh. 9.A - Prob. 3PCh. 9.A - Prob. 4PCh. 9.A - Prob. 5PCh. 9 - Prob. 1QTDCh. 9 - Prob. 2QTDCh. 9 - Prob. 3QTDCh. 9 - Prob. 4QTD
Ch. 9 - Prob. 5QTDCh. 9 - Prob. 6QTDCh. 9 - Prob. 7QTDCh. 9 - Prob. 8QTDCh. 9 - Prob. 9QTDCh. 9 - Prob. 10QTDCh. 9 - Prob. 11QTDCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22P
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- firm is considering purchasing a machine that costs $77,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $41,000 per year in labor, but it will incur $16,000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 35%, and its after-tax MARR is 18%. What is the present worth of the project?arrow_forwardA company has purchased a machine at the cost of $35,000. The machine is expected to provide annual savings of $50,000 for two years and is to be depreciated by the MACRS three-year recovery period. This machine will require annual operating and maintenance costs in the amount of $15,000. The salvage value at the end of two years is expected to be $8,000. a) Assuming a marginal tax rate of 30% and MARR of 10%, what are the following for the Income Statement: Revenue,Expenses, Depreciation, Taxable Income, Taxes (30%), Net Income. What are the following for the Cash Flow Statement: Net Income, Depreciation, Capital Expenditure, Salvage Value, Gains Tax / Credit, Net After Tax Cash Flow. b) Assume MARR of 8%, calculate NPV of the project.arrow_forwardYour firm needs a computerized machine tool lathe which costs $47,000 and requires $11,700 in maintenance for each year of its 3- year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 11 percent. Calculate the depreciation tax shield for this project in year 3. Note: Round your answer to 2 decimal places. Answer is complete but not entirely correct. 4,286.00 Depreciation tax shieldiarrow_forward
- A machine has a first cost of $10,000 and an expected salvage value of $900 when it is sold. Annually, the operating cost is $500, and the revenue generated from sales is $2,500. What is the payback period assuming a MARR of 20% per year, an effective tax rate of 15%, and straight line depreciation over 5 years taking into account the salvage value (note, even though the machine might be fully depreciated down to its salvage value for tax purposes, assume the machine can continue to operate forever and that it will never be sold).arrow_forwardDaily Enterprises is purchasing a $10.33 million machine. It will cost $69,436.00 to transport and install the machine. The machine has a depreciable life of five years using the straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.10 million per year along with incremental costs of $1.19 million per year. Daily's marginal tax rate is 37.00%. The cost of capital for the firm is 13.00%. (answer in dollars..so convert millions to dollars) The project will run for 5 years. What is the NPV of the project at the current cost of capital?arrow_forwardDaily Enterprises is purchasing a $9.7 million machine. It will cost $45,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.2 million per year along with incremental costs of $1.2 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? The free cash flow for year 0 will be $. (Round to the nearest dollar.) (…..arrow_forward
- GoHigher is planning to purchase a machine that will cost $24,000. It has a six-year life with no salvage value. GoHigher expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. Sales . $90,000 Costs: Manufacturing... Depreciation on machine. Selling and administrative expenses. Income before taxes .. Income tax (50%). $52,000 4,000 30,000 (86.000) $ 4,000 ( 2,000) $ 2,000 Net income. What is GoHigher's payback period for this machine? 24 years. 1 year. 4 years. 12 years. 6 years.arrow_forwardA local delivery company has purchased a delivery truck for $15,000. The truck will be depreciated under MACRS is five-year property. The truck's market va lue (or selling price) is expected to be $2,500 less each year. The O&M costs are expected to be $3.000 per year. The firm is in a 40% tax bracket. and its MARR is 15%. Compute the annual-equivalent cost for retaining the truck for a two-year period, which will be(a) $5,527 (b) $5.J75 (c) $5,362 (cl) $5,014arrow_forwardDaily Enterprises is purchasing a $10.4 million machine. It will cost $46,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.4 million per year along with incremental costs of $1.5 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? The free cash flow for year 0 will be $10,446,000. (Round to the nearest dollar.) The free cash flow for years 1-5 will be $ (Round to the nearest dollar.)arrow_forward
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