Question
In: Finance
3. A new machine will cost $600,000 including delivery and installation. The new unit has a...
3. A new machine will cost $600,000 including delivery and installation. The new unit has a CCA depreciation
rate of 25 percent. At the end of four years, it will be sold for $100,000. The net working capital requirement
required at the beginning of the rst four years are $50,000, $60,000, $70,000, and $60,000.
In the rst year, revenue will increase by $150,000 and operating costs will decrease by $30,000. The dierence
between them, R?C, will grow at 3 percent. The tax rate is 30 percent, and the discount rate is 14 percent.
(a) How will R ? C in the next four years aect the project's NPV?
(b) How will the PVCCATS and the proceeds from the sale at the end of year 4 aect the project's NPV?
(c) How will net working capital in the next four years aect the project's NPV?
(d) What is the free cash ow in year 1?
(e) What is the NPV of the project?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A new machine will cost $600,000 including delivery and installation. The new unit has a CCA...
A new machine will cost $600,000 including delivery and
installation. The new unit has a CCA depreciation rate of 25
percent. At the end of four years, it will be sold for $100,000.
The net working capital requirement required at the beginning of
the first four years are $50,000, $60,000, $70,000, and
$60,000.
In the first year, revenue will increase by $150,000 and
operating costs will decrease by $30,000. The difference between
them, R−C, will grow at 3 percent. The...
Cheetah Copy purchased a new copy machine. The new machine cost $110,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost
$110,000 including installation. The company estimates the
equipment will have a residual value of $27,500. Cheetah Copy also
estimates it will use the machine for four years or about 8,000
total hours. Actual use per year was as follows:
Year
Hours Used
1
2,000
2
1,600
3
2,000
4
3,200
1. Prepare a depreciation schedule for four
years using the straight-line method. (Do not round your
intermediate calculations.)
2....
Cheetah Copy purchased a new copy machine. The new machine cost $136,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost
$136,000 including installation. The company estimates the
equipment will have a residual value of $34,000. Cheetah Copy also
estimates it will use the machine for four years or about 8,000
total hours. Actual use per year was as follows:
Year
Hours Used
1
2,900
2
1,900
3
1,900
4
3,500
2. Prepare a depreciation schedule for four
years using the double-declining-balance method.
CHEETAH COPY
Depreciation
Schedule—Double-Declining-Balance
End of Year...
Cheetah Copy purchased a new copy machine. The new machine cost $114,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost
$114,000 including installation. The company estimates the
equipment will have a residual value of $28,500. Cheetah Copy also
estimates it will use the machine for four years or about 8,000
total hours. Actual use per year was as follows: Year Hours Used 1
2,000 2 2,000 3 2,000 4 3,200 2. Prepare a depreciation schedule
for four years using the double-declining-balance method. (Hint:
The asset will be depreciated in...
Cheetah Copy purchased a new copy machine. The new machine cost $114,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost
$114,000 including installation. The company estimates the
equipment will have a residual value of $28,500. Cheetah Copy also
estimates it will use the machine for four years or about 8,000
total hours. Actual use per year was as follows: Year Hours Used 1
2,000 2 2,000 3 2,000 4 3,200 3. Prepare a depreciation schedule
for four years using the activity-based method. (Round your
"Depreciation Rate" to 3 decimal...
Cheetah Copy purchased a new copy machine. The new machine cost $130,000 including installation. The company...
Cheetah Copy purchased a new copy machine. The new machine cost
$130,000 including installation. The company estimates the
equipment will have a residual value of $32,500. Cheetah Copy also
estimates it will use the machine for four years or about 8,000
total hours. Actual use per year was as follows: Year Hours Used 1
2,000 2 2,000 3 2,000 4 3,200 1. Prepare a depreciation schedule
for four years using the straight-line method. 2. Prepare a
depreciation schedule for four...
If you have an asset worth 600,000 and an installation cost of 25,000 and it has...
If you have an asset worth 600,000 and an installation cost of
25,000 and it has been forecast that at the end of five years you
will sell the asset for 18,000:
A) does the value of the asset include the installation for
depreciation purposes?
B) using the straight line method what is the correct amount
of annual depreciation that should be recorded in the operational
cashflow? Is the salvage cost deducted first?
C) after the five years is there...
Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000....
Company purchases a new punch press at a cost of $265,000. Delivery
and installation cost $46,000. The machine has a useful life of
12-years, but will depreciate using MACRS over a seven year
property class,
1. What is the cost basis of the machine
2. What will be the depreciation allowance each year over the
seven years
3. If we sell the machine at the end of five years for
$70,000, what will be the gain/loss tax assuming a 40%...
You are considering a new project that requires $300,000 investment in a machine, including installation and...
You are considering a new project that requires $300,000
investment in a machine, including installation and shipping cost.
The life of the machine is three years, and it depreciates via
3-year MACRS methods (33.33%, 44.45%, 14.81%, and 7.41%). If you
operate this project, the annual sales of the firm increases by
$250,000 a year, and the annual operating expense increased by
$100,000. The firm has a marginal tax rate of 34%. In order to
start the project, the firm has...
A purchased machine cost $320,000 with delivery and installation charges amounting to $30,000. The declared salvage...
A purchased machine cost $320,000 with delivery and installation
charges amounting to $30,000. The declared salvage value was
$50,000. Early in Year 3, the company changed its product mix and
found that it no longer needed the machine. One of its com-
petitors agreed to buy the machine for $180,000. Determine the
loss, gain, or recapture of MACRS depreciation on the sale. The ADR
is 12 years for this machine.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Search the Internet to find (at least 2 websites) related to the general field of malware....
- Consider the following schema: Suppliers(sid, sname, address) Parts(pid, pname, color) Catalog(sid, pid, cost) write the following...
- Singh Development Co. is deciding whether to proceed with Project X. The cost would be $12...
- CS2123 Data Structures - Fall 2019 Assignment 1: Function Runtimes Table Due 9/11/19 by 11:59pm Completing...
- Question 2. Design a 16-1 MUX using any number of lower MUXs, such as 8-1 or...
- . Write a function that takes, as arguments, two objects, value1 and value2. If
- Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market...
ADVERTISEMENT