Problem 12-8 After-Tax Cash Flow from Sale of Assets (LG12-4) Your firm needs a computerized machine tool lathe which costs $46,000 and requires $11,600 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. Assume a tax rate of 35 percent and a discount rate of 13 percent. If the lathe can be sold for $4,600 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Salvage value after $ 1,430.65 tax
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- 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?i will 10 upvotes urgent Your firm needs a computerized machine tool lathe which costs $56,000 and requires $12,600 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. Assume a tax rate of 35 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 3.Q.2 A piece of construction equipment costs $325,000. It will be depreciated as Modified Accelerated Cost Recovery System (MACRS) 7-year property, and the firm's tax rate is 30%. The equipment generates $80,000 in net revenue per year. The after-tax cash flow in Year 3 will be $______.
- Problem 3 A piping contractor is considering the purchase of a number of pipe laying machines for a project that will last for 6 years. Each machine will cost $ 50,000.00 and have no salvage value at the end of the project. In determining whether to make this purchase, straight line deprecation can be used and an annual income tax on profits of of 34%, and an after-tax MARR is 8%. What is the minimum annual net benefit before taxes that must be generated by the each machine in order to justify its purchase? Answer:6.1 Calculating Project NPV Paul Restaurant is considering the purchase of a $9,300 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 1,400 soufflés per year, with each costing $1.97 to make and priced at $4.95. The discount rate is 14 percent and the tax rate is 21 percent. Should the company make the purchase?Project Section 1: You are considering buying an industrial equipment whose price is 445000. The equipment is expected to earn an annual revenue of $150,000. The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR 15% . c) Annual equivalent cash flow company MARR 15%. = =
- Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…3 Your firm needs a computerized machine tool lathe which costs $59,000 and requires $12,900 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 12 percent. If the lathe can be sold for $5,900 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.) Salvage value after tax $ 5,380.45X 4
- b. eBook The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next a years, Machine A has an after-tax Jost of $8.7 million but will provide after-tax inflows of $4.9 million per year for 4 years. If Machine A were replaced, es after-tax cost would be $9.9 million due to inflation and its after-tax cash inflows would increase to $5.4 million due to production efficiencies Machine has an after-tax cost of $13 million and will provide after-tax inflows of $4.2 million per year for 8 years. If the WACC is 8%, which machine should be acquired? Explain, Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine A Machine B V millions, rather than the s 11.14 millions created byeBook The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8- years. Machine A has an after-tax cost of $9.3 million but will provide after-tax inflows of $4.1 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $11.1 million due to inflation and its after-tax cash inflows would increase to $4.6 million due to production efficiencies. Machine B has an after-tax cost of $14.6 million and will provide after-tax inflows of $4.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain, Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine B created by Machine A Hide Feedback Incorrect O millions, rather than the s millions Work…Problem 3. Malipol Books is considering the purchase of a new binding equipment that will reduce operating costs. The cost of the equipment will be Php 70,000, which will be depreciated straight line over 5 years to a zero-salvage value. Sales are expected to increase Php 65,000 per year, with an expected cash flow earnings before depreciation and taxes/sales ratio of 60%. What is the expected after-tax cash flows from the project if the tax rate is 40%?