Question
In: Accounting
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000. The new machine will lead to an increase in cash sales of $280,000 p.a. Annual interest expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will decrease by $60,000 with the new machine. The new machine has a five-year life for tax purposes and for internal management accounting the firm assumes all non-current assets have a ten-year tax life.
The firm will sell its existing machine for $73,000 today and this machine is being depreciated at $23,000 p.a. over its remaining five-year life. Assume the company tax rate is 30%.
What are the 'cash flows over the life'
Solutions
Expert Solution
Hello,
I have solved this question by using an incremental approach. Any cash flow due to a new machine is considered. Tax saving due to depreciation as per tax rules i.e. during 5 years.
Any doubts are welcome.
ekkarill92 answered 2 years agoRelated Solutions
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called...
The Canton Sundae Corporation is considering the replacement of
an existing machine. The new machine, called an X-tender, would
provide better sundaes, but it costs $120,000. The X-tender
requires $20,000 in additional net working capital, which will be
recouped at the end of the project. The machine’s useful life is 10
years, after which it can be sold for a salvage value of $40,000.
Straight-line depreciation will be used and the machine will be
depreciated to zero over the 10-year...
The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called...
The Canton Sundae Corporation is considering the replacement of
an existing machine. The new machine, called an X-tender, would
provide better sundaes, but it costs $120,000. The X-tender
requires $20,000 in additional net working capital, which will be
recouped at the end of the project. The machine’s useful life is 10
years, after which it can be sold for a salvage value of $40,000.
Straight-line depreciation will be used and the machine will be
depreciated to zero over the 10-year...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the
replacement of an existing machine. The new machine costs $1.8
million and requires installation costs of $250,000. The existing
machine can be sold currently for $125,000 before taxes. The
existing machine is 3 years old, cost $1 million when purchased,
and has a $290,000 book value and a remaining useful life of 5
years. It was being depreciated under MACRS using a 5-year recovery
period. If it is held for 5 more years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine's...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- If a corporation has limited capital to use for project investment, but it has more projects...
- I have a problem with my code. It does not run. Please can someone check the...
- As discussed in the text, in the absence of market imperfections and tax effects, we would...
- //This is an ArrayReverser Problem.. import java.util.Scanner; public class Main { public static void main(String[] args)...
- After completing its capital spending for the year, Carlson Manufacturing has $1,100 extra cash. Carlson’s managers...
- Question 2: How can we find the real root of a polynomial with one variable? Also...
- Apply the Cognitive/Affective/Behavior Attitude model to a day to day personal life experience at work, home...
ADVERTISEMENT