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In: Finance
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will...
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will generate revenues of $100,000 per year for five years. The cost of materials and labour needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s tax rate is 34 percent, and its opportunity cost of capital is 14.40 percent. What is the project's NPV? Should Rocky Mountain accept or reject the project?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will...
Rocky Mountain Sports Ltd is considering purchasing a new
machine that costs $60,000. The machine will generate revenues of
$100,000 per year for five years. The cost of materials and labour
needed to generate these revenues will total $60,000 per year, and
other cash expenses will be $10,000 per year. The machine is
expected to sell for $2,500 at the end of its five-year life and
will be depreciated on a straight-line basis over five years to
zero. Rocky Mountain’s...
Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $70,000. The saw...
Snowy Mountain Timber Ltd is considering purchasing a new wood
saw that costs $70,000. The saw will generate revenues of $100,000
per year for five years. The cost of materials and labour needed to
generate these revenues will total $60,000 per year, and other cash
expenses will be $10,000 per year. The machine is expected to sell
for $3,500 at the end of its five-year life and will be depreciated
on a straight-line basis over five years to zero. Snowy...
Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $50,000. The saw...
Snowy Mountain Timber Ltd is considering purchasing a new wood
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per year for five years. The cost of materials and labour needed to
generate these revenues will total $60,000 per year, and other cash
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on a straight-line basis over five years to zero. Snowy...
Snowy Mountain Timber Ltd is considering purchasing a new wood saw that costs $55,000. The saw...
Snowy Mountain Timber Ltd is considering purchasing a new wood
saw that costs $55,000. The saw will generate revenues of $100,000
per year for five years. The cost of materials and labour needed to
generate these revenues will total $60,000 per year, and other cash
expenses will be $10,000 per year. The machine is expected to sell
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A company is considering purchasing a new machine that would cost $60,000 and the machine would...
A company is considering purchasing a new machine that would
cost $60,000 and the machine would be depreciated (straight line)
down to $0 over its four year life. At the end of four years it is
believed that the machine could be sold for $12,000. The machine
would increase EBDT by $42,000 annually. the company's marginal tax
rate is 34%.
What the RATFCF’s associated with the purchase of this
machine?
$31,800
$32,820
$30,452
$29,940
Mars Inc. is considering the purchase of a new machine that costs $60,000. This machine will...
Mars Inc. is considering the purchase of a new machine that
costs $60,000. This machine will reduce manufacturing costs by
$5,000 annually. Mars will use the MACRS accelerated method (shown
below) to depreciate the machine, and it expects to sell the
machine at the end of its 5-year life for $10,000. The firm expects
to be able to reduce net operating working capital by $15,000 when
the machine is installed, but the net working capital will return
to the original...
Mars Inc. is considering the purchase of a new machine that costs $60,000. This machine will...
Mars Inc. is considering the purchase of a new machine that
costs $60,000. This machine will reduce manufacturing costs by
$5,000 annually. Mars will use the MACRS accelerated method (shown
below) to depreciate the machine, and it expects to sell the
machine at the end of its 5-year life for $10,000. The firm expects
to be able to reduce net operating working capital by $15,000 when
the machine is installed, but the net working capital will return
to the original...
ABC is looking at purchasing a new machine. The new machine installed cost is $60,000 and...
ABC is looking at purchasing a new machine. The new machine
installed cost is $60,000 and requires minimal increase in NWC (net
working capital). It will be sold at the end of year 3 for an
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prior to depreciation: Year 1$20,000, Year 2 $30,000, Year 3
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is...
Crane Lumber, Inc., is considering purchasing a new wood saw that costs $60,000. The saw will...
Crane Lumber, Inc., is considering purchasing a new wood saw
that costs $60,000. The saw will generate revenues of $100,000 per
year for five years. The cost of materials and labor needed to
generate these revenues will total $60,000 per year, and other cash
expenses will be $10,000 per year. The machine is expected to sell
for $3,500 at the end of its five-year life and will be depreciated
on a straight-line basis over five years to zero. Crane’s tax...
Mystic Beverage Company is considering purchasing a new bottling machine. The new machine costs $165,124, plus...
Mystic Beverage Company is considering purchasing a new bottling
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$13,539 and will generate earning before interest and taxes of
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depreciated on a straight-line basis over its 6-year life to an
estimated salvage value of 0. Mystic’s marginal tax rate is 0%.
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Determine the annual cash flow in year...
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