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In: Finance
Cuda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital investment proposal....
Cuda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital investment proposal. The proposed asset costs $50,000 and has installation costs of $3,000. The asset will be depreciated using a five-year recovery schedule. The existing equipment, which originally cost $25,000 and will be sold for $10,000, has been depreciated using an MACRS five- year recovery schedule and three years of depreciation has already been taken. The new equipment is expected to result in incremental before-tax net profits of $15,000 per year. The firm has a 40 percent tax rate.
a. The book value of the existing asset is ________.
b. The tax effect on the sale of the existing asset results in
________.
c. The initial outlay equals ________.
d. The incremental depreciation expense for year 1 is
________.
e. The annual incremental after-tax cash flow from operations for
year 1 is ________.
PLEASE SHOW WORK thank you
Solutions
jeff jeffy answered 2 hours agoRelated Solutions
Cuda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital budgeting project....
Cuda Marine Engines, Inc. must develop the relevant cash flows
for a replacement capital budgeting project. The proposed asset
costs $50,000 and has installation costs of $3,000. The asset will
be depreciated using the MACRS five year recovery schedule. The
existing equipment was purchased three years ago which orginally
cost $25,000, has been depreciated using MACRS 5-year period. The
new equipment is expected to result in an incremental increases in
revenue of $10,000 a year for five years and a...
Suda Marine Engines, Inc. must develop the relevant cash flows for a replacement capital investment proposal....
Suda Marine Engines, Inc. must develop the relevant cash flows
for a replacement capital investment proposal. The proposed asset
costs $50,000 and has installation costs of $5,000 and will be put
into operation for the next three years. The asset will be
depreciated using a three-year recovery schedule (with MARCS
depreciation rates of 45%, 33%, 15%, 7% for years 1 to 4). The
existing equipment, which originally cost $25,000 is fully
depreciated and has no salvage value today. The new...
CME Inc. must develop the relevant cash flows for a replacement capital investment proposal. The proposed...
CME Inc. must develop the relevant cash flows for a replacement
capital investment proposal. The proposed asset costs $50,000 and
has installation costs of $3,000. The asset will be depreciated
using a five-year recovery schedule. The existing equipment, which
originally cost $25,000 and will be sold for $10,000, has been
depreciated using an MACRS five-year recovery schedule and three
years of depreciation has already been taken. The new equipment is
expected to result in incremental before-tax net profits of $15,000...
A company must develop the relevant cash flows for a replacement capital investment proposal. The proposed...
A company must develop the relevant cash flows for a replacement
capital investment proposal. The proposed asset costs $50,000 and
has installation costs of $3,000. The asset will be depreciated
using a five-year recovery schedule. The existing equipment, which
originally cost $25,000 and will be sold for $10,000, has been
depreciated using an MACRS five-year recovery schedule and three
years of depreciation has already been taken. The new equipment is
expected to result in incremental before-tax net profits of $15,000...
A company must develop the relevant cash flows for a replacement capital investment proposal. The proposed...
A company must develop the relevant cash flows for a replacement
capital investment proposal. The proposed asset costs $50,000 and
has installation costs of $3,000. The asset will be depreciated
using a five-year recovery schedule. The existing equipment, which
originally cost $25,000 and will be sold for $10,000, has been
depreciated using an MACRS five-year recovery schedule and three
years of depreciation has already been taken. The new equipment is
expected to result in incremental before-tax net profits of $15,000...
Capital Budgeting: Estimating Cash Flows for an Investment A company is considering replacement of manufacturing equipment...
Capital Budgeting: Estimating Cash Flows for an
Investment
A company is considering replacement of manufacturing equipment
with computer controlled equipment, at a cost of $500,000,
replacing equipment with a scrap value of $50,000. This will reduce
defect costs by $150,000 a year. At the end of 7 years, the
equipment will be replaced and will have a scrap value of $100,000.
The interest charges for financing the purchase will be $25,000 a
year. The new system will be housed in...
Cummins Engines, Inc. is considering two alternative investment proposals. The first proposal calls for investment in...
Cummins Engines, Inc. is considering two alternative investment
proposals. The first proposal calls for investment in plant and
equipment to produce a new alternative fuel engine. The second
proposal calls for investment in plant and equipment to expand
production of a current, successful diesel engine. Cummins will
choose only of these project since they are for similar
markets.
Year
New Line
Expand Line
0
($65,000,000)
($20,000,000)
1
$20,000,000
$11,000,000
2
$20,000,000
$10,000,000
3
$20,000,000
$8,000,000
4
$20,000,000
$0
5
$20,000,000...
What are relevant cash flows? Why should we only include these cash flows in our capital...
What are relevant cash flows? Why should we only include these
cash flows in our capital budgeting analysis? Please also give some
examples.
1. Machine Enterprises is considering an investment proposal with the following cash flows: Initial investment-depreciable assets...
1. Machine Enterprises is considering an investment proposal
with the following cash flows:
Initial investment-depreciable assets
$45,000
Net cash inflows from operations (per year for 10 years)
5,000
Disinvestment
0
Determine the accounting rate of return on initial investment
and the accounting rate of return on average investment.
2. Great Texas is considering a capital expenditure proposal
that requires an initial investment of $9,460, has predicted cash
inflows of $2,000 per year for 16 years, and has no salvage value....
1. Calculate the payback period for the following investment proposal. Investment Annual Net Cash Flows 1...
1. Calculate the payback period for the following investment
proposal.
Investment
Annual Net Cash Flows
1
2
3
4
5
6
7
8
9
10
250
86
50
77
52
41
70
127
24
6
40
Payback Period:
2.A 4-year project has a projected cash inflow of
$5,000 in the first year, $10,000 in the second year, $15,000 in
the third year, and $20,000 in the fourth year. It will cost
$19,000 to implement the project. The required rate of...
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