Current Attempt in Progress Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $56,100, lasts 9 years with no salvage value, and costs $150.000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $84,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%. and MARR is an after-tax 10% a. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative. AWA-S AWE -S Which should be selected? (Investment A: Investment B)

Current Attempt in Progress Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $56,100, lasts 9 years with no salvage value, and costs $150.000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $84,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%. and MARR is an after-tax 10% a. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative. AWA-S AWE -S Which should be selected? (Investment A: Investment B)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $51,300, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $76,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%, and MARR is an after-tax 10%. a. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative. AWA = $ AWB = $ Which should be selected? (Investment A; Investment B) b. What must be Investment B's cost of operating expenses for these two investments to be equivalent? $ Round your answer to 2 decimal places. The tolerance is + 10.
Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of $53,600, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $84,500.00, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company marginal tax rate is 25%, and MARR is an after-tax 10%. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative. What must be Investment B's cost of operating expenses for these two investments to be equivalent? $
Mansour, a farmer in BaniSweif, is considering the purchase of a new soil cultivating machine, either the type A or B. The minimum acceptable rate of return is 0.08. The table below provides all the necessary information for the two types. A B Initial Cost Annual Operation and Maintenance cost $6700 $16900 $1500 $1200 Annual Benefit $4000 $4500 $1000 $3500 Salvage Value Useful Life, in years 3 6 Determine the rate of return on machine A What is the incremental rate of return (M/c B - M/c A)? Using the above analysis, decide which machine should be bought: 1 for Machine A 2 for Machine B
Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of$58,500, lasts 9 years with no salvage value, and costs $150,000 per year in operating expenses. It is in the 3-year property class. Investment B has a cost of $87,500, lasts 9 years with no salvage value, and costs $125,000 per year. Investment B, however, is in the 7-year property class. The company income-tax rate is 25% and MARR is an after-tax 10%. Solve, a. Based upon the use of MACRS-GDS depreciation, compare the AW of each alternative to determine which should be selected. b. What must be Investment B’s cost of operating expenses for these two investments to be equivalent?
SGS Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $147,000, has a 5-year life, and costs $9,600 per year to operate. The relevant discount rate is 13 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $23,000 at the end of the project’s life. The relevant tax rate is 25 percent. All cash flows occur at the end of the year. What is the EAC of this equipment? (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
SGS Golf Academy is evaluating different golf practice equipment. The "Dimple-Max" equipment costs $140,000, has a 4-year life, and costs $9,200 per year to operate. The relevant discount rate is 13 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $21,000 at the end of the project’s life. The relevant tax rate is 21 percent. All cash flows occur at the end of the year. What is the EAC of this equipment? Note: Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $113,000, has a 5-year life, and costs $9,200 per year to operate. The relevant discount rate is 9 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $8,500 at the end of the project's life. The relevant tax rate is 25 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment?
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple-Max" equipment costs $152,000, has a 6-year life, and costs $10,500 per year to operate. The relevant discount rate is 10 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $11,100 at the end of the project’s life. The relevant tax rate is 23 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Sheep Ranch Golf Academy is evaluating new golf practice equipment. The "Dimple- Max" equipment costs $137,000, has a 4-year life, and costs $10,600 per year to operate. The relevant discount rate is 9 percent. Assume that the straight-line depreciation method is used and that the equipment is fully depreciated to zero. Furthermore, assume the equipment has a salvage value of $10,100 at the end of the project's life, The relevant tax rate is 23 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment? (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. $ 40,871.52 X EAC
Two different types of hydraulic equipment are being considered for a certain power plant. Machine A has a first cost of P15,000, and a salvage value of P1,500, life is 6 years and has an annual maintenance an operating cost of P900. Machine B has a first cost of P18,000, life of 8 years with no salvage value. Annual operating cost is P750. Which machine would be used to justify the purchase of such machine if money is worth 7% and compute the difference between its equivalent present worth? Show solutions.
Two different mutually exclusive alternatives can be used for producing a certain machine part. Alternative A will have a first cost of $60,000 with a $15,000 salvage value after its 3 year life. The operating cost with this method will be $35,000 per year. Alternative B will cost $45,000, but it will last only 2 years. Its salvage value is $10,000 with an operating cost of $25,000 per year. Using an MARR value of 12% per year, which method should be selected?
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 1imos) $ 840,000 Useful life: 10 years Salvage value $ 120,000 Annual net income generated LLT's cost of capital $ 70,560 14% Assume straight line depreciation method is used. Required: Help LLT evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payback period. 3. Net present value. 4. Without making any calculations, determine whether the IRR is more or less than 14%. Complete this question by entering your answers in the tabs below.