You are evaluating building a project on a piece of land that the company has owned for five years. Two years ago, the company had to clean the land due to an oil spill that costed $390,000.00. True or False: The cost of $390,000 will need to be included as a cost when evaluating the NPV of the new building. O True O False
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- You have been asked to evaluate a pollution device. The device costs $500 to set up and $100 per year to operate. It must be completely replaced every 4 years, and it has no salvage value. Assume the pollution control equipment is replaced as it wears out. and the cost of capital is 12%. What is the EAC of the wet scrub device? A$257.74 B) $264.62 $286.04 D) $296.93 $331.21You purchased a box-making machine that cost $50,000 five years ago At that time, the system was estimated to have a service life of five years with salvage value of $5,000. These estimates are still good. The property has been depreciated at a declining balance CCA rate of 30%. Now (at the end of year 5 from pur chase) you are considering selling the machine for $10,000. What UCC should you use in determining the disposal tax effect?Listen The Georgia DOT has purchased equipment for the new road construction around Kenesaw State University, costing $600,000. Estimated salvage value at the end of year 4 is $65,000. Use straight line depreciation, 125% DB, and DDB methods to calculate the depreciation in year 2. Write your formulas and identify al variables. Explain your answers and compare and contrast the concept of the various depreciation methods as it applies to your answer. SHOW ALL WORK
- Assume you have been hired to evaluate an investment required by EPA for a waste managment system for a nearby hog operation. The system will cost $350,000 and will last 30 years but only depreciated for 10 years. Assuming straight line depreciation, the salvage value is zero for depreciation. The actual expected terminal value is $50,000 which will be received in 30 years time. The system has a $3,250 annual maintenance cost. The marginal tax rate is 28% and the after-tax cost capital is 8.25%. The production of hog will require feed at $23,000 per year and the operation will produce $60,000 in income each year. Prepare a net present cost budget for the capital investment. All answers should be rounded to two places to the right of the decimal. Item Pre-Tax Flow After-Tax Flow Years Discount Rate PV Factor Present Value Waste System -350,000 -$350,000 0 0.0825 1.00 Depr Shield 1-10 0.0825 Terminal Value 30 0.0825 Maintenance Cost 1-30 0.0825 NPV…A city has purchased a new asphalt paving machine for $300,000.The city comptroller states that the machine will be depreciatedusing a stright line method. At the end of 8 years, the machinewill be sold with an expected salvage value of 60,000.a. Determine the function V = f(t) which expresses the bookvalue of the machine V as a function of its age t.b. What is the book value expected to be when the machine is 6years old?Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 12,000 square yards. Bid A: A surface that costs $5.75 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: A surface that costs $10.50 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 9 cents per square yard. Click here to view factor tables. Compute present value of the bids. You may assume that the cost of capital is 9%, that the annual maintenance…
- Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 11,600 square yards. Bid A: A surface that costs $6.25 per square yard to install. This surface will have to be replaced at the end of years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: A surface that costs $10.25 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 11 cents per square yard. Click here to view factor tables. Compute present value of the bids. You may assume that the cost of capital is 11%, that the annual maintenance…I have the answer and question below but I just needf to know how to work it out Solve the problem. Round unit depreciation to nearest cent when making the schedule, and round final results to the nearest cent. A construction company purchased a piece of equipment for $1,710. The expected life is 7,000 hours, after which it will have a salvage value of $280. Find the amount of depreciation for the first year if the piece of equipment was used for 1,600 hours. Use the units-of-production method of depreciation. Answer: ($320)A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M costs are$105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer isreplaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, itwill have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyzethis using an EUAC measure and a MARR of 15 percent to see if the concrete mixer should be replaced if the oldmixer is sold for its market value of $65,000.a. Use the cash flow approach (insider’s viewpoint approach). (11.2.1)b. Use the opportunity cost approach (outsider’s viewpoint approach). (11.3.1)
- Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $50,600, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining. The new machine that is being considered costs $75,200 and requires $3,900 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $55,300 without incurring any removal or cleanup costs. The firm is subject to a tax rate of 21%.The revenues and expenses (excluding depreciation and interest) associated with the new and the old machines for the next 5 years are given in the table attached. . (The second table1894 contains the applicable MACRS depreciation percentages.) Note:The new machine will have no terminal value at the end of 5 years. a. Calculate the initial cash flow…Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 12,000 square yards. Bid A: A surface that costs $5.75 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: A surface that costs $10.50 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 9 cents per square yard. Instructions Prepare computations showing which bid should be accepted by Wal-Mart. You may assume that the cost of capital is 9%, that…An eco-industrial park has a manufacturing plant which purchased a lathe machine for P57,500 seven years ago. A reserve for machine replacement has been provided using straight-line depreciation accounting its 20 years life span. The plant manager has decided to replace the old machine with a newer model costing P95,000. The manager can sell the old machine for P17,500. What is the amount of the additional capital needed to purchase the new machine?
