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Mom’s Cookies, Inc., is considering the purchase of new cookie oven. The original cost of the...
Mom’s Cookies, Inc., is considering the purchase of new cookie oven. The original cost of the old oven was $30,000; it is now five years old; and has a current market value of $5,000. The old oven is being depreciated over a 10 year life towards a zero estimated salvage value on a straight line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash saving from the new oven are $2,000 a year. Depreciation is computed using MACRS 5 year life, and cost of capital is 12 percent. Assume 40 percent tax rate. What is the net present value of the new oven?
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jeff jeffy answered 1 month agoRelated Solutions
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie
oven. The original cost of the old oven was $35,000; it is now five
years old, and it has a current market value of $15,000.00. The old
oven is being depreciated over a 10-year life toward a zero
estimated salvage value on a straight-line basis, resulting in a
current book value of $17,500 and an annual depreciation expense of
$3,500. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie
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years old, and it has a current market value of $22,000. The old
oven is being depreciated over a 10-year life toward a zero
estimated salvage value on a straight-line basis, resulting in a
current book value of $23,500 and an annual depreciation expense of
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Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie
oven. The original cost of the old oven was $38,000; it is now five
years old, and it has a current market value of $16,500. The old
oven is being depreciated over a 10-year life toward a zero
estimated salvage value on a straight-line basis, resulting in a
current book value of $19,000 and an annual depreciation expense of
$3,800. The old oven can be used for six more...
Mom’s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Mom’s Cookies, Inc., is considering the purchase of a new cookie
oven. The original cost of the old oven was $42,000; it is now five
years old, and it has a current market value of $18,500. The old
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Your firmMoms cookies is considering the purchase of a new cookie oven. The original cost of...
Your firmMoms cookies is considering the purchase of a
new cookie oven. The original cost of the old oven was $35000;it is
now 5 years old and it has a current market value of $15000. The
old oven is being depreciated over a 10 year life toward a zero
estimated salvage value on a strait line basis resulting in a
current book value of !17500 and an annual depreciation expense of
3500. The old oven can be used for six...
Mom's Cookies Inc. is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now 5 years old, and it has a current market value of $13,333.33.
Mom's Cookies Inc. is considering the purchase of a new
cookie oven. The original cost of the old oven was $30,000; it is
now 5 years old, and it has a current market value of $13,333.33.
The old oven is being depreciated over a 10-year life toward a zero
estimated salvage value on a straight-line basis, resulting in a
current book value of $15,000 and an annual depreciation expense of
$3,000. The old oven can be used for 6 more...
Cookies R Us Incorporated is evaluating a new cookie cutting machine that will cost $500,000. The...
Cookies R Us Incorporated is evaluating a new cookie cutting
machine that will cost $500,000. The machine can be depreciated on
a straight-line basis to zero over 10 years. It will provide the
company with annual before-tax savings of $135,000. The marginal
corporate tax rate is 40% and the required rate of return is 15%.
What is the net present value of this cost-cutting asset?
Multiple Choice
$128,611.12
$157,458.69
-$193,855.11
$6,895.63
$277,909.14
Management is contemplating the purchase of a new oven which cost $25,000.00 with an estimated salvage...
Management is contemplating the purchase of a new oven which
cost $25,000.00 with an estimated salvage value of zero. Expected
before tax cash savings from the new oven are $4,000 a year over
its full depreciable life. Depreciation is computed using straight
line over a 5 year life, and the cost of capital is 10%. At the end
of the oven's life, it can be sold for 2,000. Assume a 40% tax
rate.
What is the net present value of...
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Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for...
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dollars. Without the new oven, costs are expected to be 11,700
dollars in 1 year and 15,200 in 2 years. With the new oven, costs
are expected to be -500 dollars in 1 year and 9,300...
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