The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. The machine is being depreciated on a straight- line basis, and it has 6 years of remaining life. Its current book value is $2,400, and it can be sold for $2,600 at this time. Thus, the anual depreciation expense is $2,400/6= $400 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would arise by $1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses simultaneously increase by $500. Dauten's marginal federal-plus- state tax rate is 25%, and its WACC is 11% What is the NPV of the incremental cash flow Stream? Negative value, if any, should be indicated. by a minus sign. Round your answer to the nearest cent. B

The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. The machine is being depreciated on a straight- line basis, and it has 6 years of remaining life. Its current book value is $2,400, and it can be sold for $2,600 at this time. Thus, the anual depreciation expense is $2,400/6= $400 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would arise by $1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses simultaneously increase by $500. Dauten's marginal federal-plus- state tax rate is 25%, and its WACC is 11% What is the NPV of the incremental cash flow Stream? Negative value, if any, should be indicated. by a minus sign. Round your answer to the nearest cent. B

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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The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,400, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,400/6 = $400 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,000 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would…
The Dauten Toy Corporation uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would…
The Dauten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100 6 $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine’s much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts…
A machine was purchased 4 years ago for $50,000. The depreciation amount each year was $10,000. The firm that owns the machine no longer has a need for it, but a buyer is now willing to pay $60,000 for it because machines of this type are no longer available. If the tax rate is 23%, what tax will be owed on the transaction? Edit
The Dakuten Toy Corporation currently uses an injection molding machine that was purchased 2 years ago. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dakuten is offered a replacement machine which has a cost of $8,000, an estimateduseful life of 6 years, and an estimated salvage value of $800. The company uses straight line method for calculating depreciation in financial accounts. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine’s much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously…
The Dauten Toy Corporation currently uses an injection moldingmachine that was purchased 2 years ago. This machine is being depreciated on astraight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, andit can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 =$350 per year. If the old machine is not replaced, it can be sold for $500 at the end of itsuseful life.Dauten is offered a replacement machine which has a cost of $8,000, an estimateduseful life of 6 years, and an estimated salvage value of $800. This machine falls into theMACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%,and 6%. The replacement machine would permit an output expansion, so sales wouldrise by $1,000 per year; even so, the new machine’s much greater efficiency would causeoperating expenses to decline by $1,500 per year. The new machine would require thatinventories be increased by $2,000, but accounts payable would…
Pet Supply purchased fixed assets two years ago at a cost of $43,800. It no longer needs the assets, so it is going to sell them today for $32,500. The assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for years 1 to 6, respectively. What is the net cash flow from the sale if the tax rate is 35%?
For specialized devices for use with its latest GPS / GIS system, Freeman Engineering charged $28,500. Using MACRS depreciation, the equipment was depreciated over a 3 year recovery period. After 2 years, the company sold the equipment for $5000 when it bought an improved system. (a) Assess the value of the recapture of depreciation or the capital loss involved in the asset sale. (b) What tax impact is that number going to have?
Totem group is planning to purchase a new printing machine to replace a current machine. The cost of the new machine Konica Minolta 512i , including delivery and installation, is IDR 140,000,000. If it is purchased, Totem will incur costs of IDR 10,000,000 to remove the current printing machine and revamp its facilities and it is tax deductible at time 0. Depreciation for tax purposes will be as follows: year 1, IDR 28,000,000; year 2, IDR 49,000,000; and in each of years 3 through 5, IDR 21,000,000 per year. The existing printing machine has a book value of IDR 70,000 and a remaining useful life of 5 years. However, the existing equipment can be sold for only IDR 25,000,000 and is being depreciated using the straight-line method over its actual life. Marketing team has provided comparative printing cost data as follow: Current Machine New Machine Machine Available per…
Nozark Corp. is now in the final year of a project. The equipment originally cost $9,179, and the asset has been has been depreciated on a straight-line basis to a book value of $736. Nozark can sell the used equipment for $2,448, and its tax rate is 30%. The equipment's net after-tax salvage value is $_________. In other words, find the net after-tax cash flow effect of selling the equipment. Do not round any intermediate work. Round your *final* answer to 2 decimal places (example: 12.34567 = 12.35). Do not enter the $ sign.
A mixer was purchased two years ago for $63346 and can be sold for $171667 today. The mixer has been depreciated using the MACRS 5-year recovery period and the firm pays 40 percent taxes on both ordinary income and capital gain. Find the after tax proceeds.
Fink Co. is interested in purchasing a new business vehicle. The vehicle costs $48,000 and will generate delivery revenue of $23,000 for each of the next 6 years. At the end of the 6 years, the vehicle will have a salvage value of $4,800. The tax rate is 21%. Assuming that the vehicle is depreciated using MACRS 5-year property class, and that Fink Co. uses an after-tax MARR of 7%, compute the PW and determine whether Fink Co. should purchase the new business vehicle. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±10. Should Fink Co. purchase the new business vehicle? Yes

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