The plant manager of RecycleNow! Corp is considering a new pulverizer for one of its recycling sorting facilities. The new machine costs $35,755 making it eligible for the company’s 3-year payback rule. The new machine is expected to produce incremental after-tax profits of $13,150/year. A) What is the payback period? (Carry your answer to 1 decimal place.) B) Should RecycleNow! buy the new pulverizer
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The plant manager of RecycleNow! Corp is considering a new pulverizer for one of its recycling sorting facilities. The new machine costs $35,755 making it eligible for the company’s 3-year payback rule. The new machine is expected to produce incremental after-tax profits of $13,150/year.
A) What is the payback period? (Carry your answer to 1 decimal place.)
B) Should RecycleNow! buy the new pulverizer?
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- Your company is considering the replacing an old machine with a more efficient model. The new machine costs $39,500, will last for 7 years and save $12,900 per year in expenses. The discount rate is 18% and the tax rate is 26%. The machine will be depreciated on a straight line basis to zero. The old machine is fully depreciated and can be sold today for $2,700. A) what is the amount of initial investment required? B) what is the after-tax gain on the sale of the old machine? The old machine is fully depreciated. C) what is the amount of operating cash flow (OCF) per year? D) what is the NPV of the project?An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. The company's before-tax MARR is 15% per year. Based on this information, should the existing robot be replaced right now? Assume the robot will be needed for an indefinite period of time. Defender Challenger Current MV $37,000 Purchase price $55,000 Required upgrade $2,000 Installation cost $6,000 Annual expenses $1,600 Annual expenses $1,100 Remaining useful life 5 years Useful life 9 years MV at end of useful life −$1,600 MV at end of useful life $6000 The AW value of the defender is The AW value of the challenger isb) Magen's Bakery, Inc., is considering the purchase of a new cake mixing equipment for $200,000. This would result in an increase in earnings before interest and taxes of $50,000 per year. To operate the machine efficiently, worker's training session would cost $10,000 after taxes. It would cost another $10,000, after taxes, to get equipment to be ready for use. Acquiring this project would cause changes in the working capital. The accountant has provided the following figures for the calculation of the working capital: Accounts receivables Inventory Accounts payables Without the project $25 000 $35 000 $50 000 With the project $55 000 $70 000 $65 000 This machine has an expected life of 10 years, after which it would have no salvage value. Finally, to purchase the new machine, it appears that the firm would have to borrow $80,000 at 10 percent interest from its local bank, resulting in additional interest payments of $8,000 per year. Assume the use of the simplified straight-line…
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- Lou Lewis, the president of Lewisville Company, has asked you to give him an analysis of the best use of a warehouse the company owns. Lewisville Company is currently leasing the warehouse to another company for $5,800 per month on a year-to-year basis. (Hint: Use the PV function in Excel to calculate, on an after-tax basis, the PV of this stream of monthly rental receipts.) Lewisville Company is seriously considering converting the warehouse into a factory outlet for furniture. The remodeling will cost $140,000 and will be modest because the major attraction will be rock-bottom prices. The remodeling cost will be depreciated over the next 5 years using the double-declining-balance method. (Note: Use the VDB function in Excel to calculate depreciation charges. The advantage of using the VDB, rather than the DDB, function is that there is a (default) option in the former that provides an automatic switch to the straight-line method when it is advantageous to do so.) The inventory and…XYZ is considering buying a new, high efficiency interception system. The new system would be purchased today for $47,700.00. It would be depreciated straight-line to SO over 2 years. In 2 years, the system would be sold for an after-tax cash flow of $14,600.00. Without the system, costs are expected to be $100,000.00 in 1 year and $100,000.00 in 2 years. With the system, costs are expected to be $79,000.00 in 1 year and $69,700.00 in 2 years. If the tax rate is 46.50% and the cost of capital is 8.40%, what is the net present value of the new interception system project? a. $11893.11 (plus or minus $50) b. $12724.27 (plus or minus $50) c. $8553.76 (plus or minus $50) d. $9953.14 (plus or minus $50) e. None of the above is within $50 of the correct answerLinksys is considering the development of a wireless home networking appliance, called HomeNet, that will provide both the hardware and the software necessary to run an entire home from any Internet connection. HomeNet's lab will be housed in warehouse space that the company could have otherwise rented out for $190,000 per year during years 1 through 4. The tax rate for Linksys is 20%. How does this opportunity cost affect HomeNet's incremental earnings? HomeNet will experience in incremental earnings of $ per year for the 4 years. (Select from the drop-down menu and round to the nearest dollar.)