QUESTION 7Massey Enterprises is planning to buy a new machine to decrease the overall cost of production. This machine will cost $50000 and will help to save the company $22000 in operating costs annually. The machine will be fully depreciated using a straight-line depreciation method to a useful lifeof 4 years. The actual market value of the machine is expected to be zero at the termination of the project. The marginal tax rate for the company is 21 and the discount rate for this project is 11 percent. What is the net present value of this 4-year project?

Net Present Value The difference that arises between the current value of cash flows and the…

Answered: QUESTION 7 Massey Enterprises is…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 12PROB

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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?
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings from 24,000 to 46,000 per year. The new machine will cost 80,000, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firms WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
#17 Daily Enterprises is purchasing a $10.51 million machine. It will cost $50,155.00 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 $4.48 million per year along with incremental costs of $1.46 million per year. Daily's marginal tax rate is 34.00%. The cost of capital for the firm is 15.00%. (answer in dollars..so convert millions to dollars) What is the year 0 cash flow for the project? Submit Answer format: Currency: Round to: 2 decimal places.
7 A firm’ management is planning to replace an old machinewith a three year remaining life and $5,000 per year depreciation by a new machine. The new machine costs $27,000. The depreciation expense on the new machine would be $9,000 per year. By using the new machine, expenses (excluding depreciation) will reduce from $55,000 to 40,000 per year. Assume a tax rate of 40 percent. What are OCF of each alternative (old-new machine)? What are relevant cashflows? (Assume that the change in the machine does not affect existing revenue of $100,000). Thank you.
19 A $89,000 machine with a 7-year class life was purchased 3 years ago. The machine will now be sold for $31,000 and replaced with a new machine costing $65,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? NOTE-- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN.
Question 9 Daily Enterprises is purchasing a $9.6 million machine. It will cost $52,000 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 $4.1 million per year along with incremental costs of $1.1 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 $nothing. (Round to the nearest dollar.) The free cash flow for years 1–5 will be $_______________________ (Round to the nearest dollar.)
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:
29. X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year? A. 6.0% B. 8.0% C. 12.0% D. 26.0% E. 52.0%
59 Salvage Co. is considering the purchase of a new ocean-going vessel that could potentially reduce labor costs of its operation by a considerable margin. The new ship would cost P500,000 and would be fully depreciated by the straight-line method over 10 years. At the end of 10 years, the ship will have no value and will be sunk in some already polluted harbor. The Salvage Co.'s cost of capital is 12 percent, and its marginal tax rate is 40 percent. The ship produces equal annual labor cost savings over its 10-year life. What is the present value of the depreciation tax benefit of the new ship? (Round to the nearest peso.) Group of answer choices P113,004 P169,506 P282,510 P200,000
question 9 Daily Enterprises is purchasing a $9.6million machine. It will cost $52,000to 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 $4.1 million per year along with incremental costs of $1.1 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.) The free cash flow for years 1–5will be $_______. (Round to the nearest dollar.)

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