Question

In: Economics

13-53) Machine A has been completely overhauled for $9,000 and is expected to last another 12...

13-53) Machine A has been completely overhauled for $9,000 and is expected to last another 12 years. The $9,000 was treated as an expense for tax purposes last year. Machine A can be sold now for $30,000 net after selling expenses, but will have no salvage value 12 years hence. It was brought new 9 years ago for $54,000 and has been depreciated since then by straight-line depreciation using a 12-year depreciable life. Because less output is now required, Machine A can be replaced with a smaller machine: Machine B casts $42,000, and an anticipated life of 12 years, and would be reduce operating costs $2,500 per year. It would be depreciated by straight-line depreciation with a 12-year depreciable life and no salvage value. The income tax rate is 40%. Compare the after-tax annual costs and decide whether Machine A should be retained or replaced by Machine B. Use a 10% after-tax rate of return.

Solutions

Expert Solution


Related Solutions

VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12...
VYS Inc will purchase a new machine that costs $30,000 and is expected to last 12 years with a salvage value of $3,000. Annual operating expenses for first year is $9,000 and increase by $200 each year thereafter. Annual income is expected to be $12,000 per year. If VYS’s MARR is 10%, determine the NFW of the machine purchase.
The client has been on bed rest for the last 12 days and has consistently been...
The client has been on bed rest for the last 12 days and has consistently been placed in the Semi Fowler’s position. The nurse assesses the client for tissue breakdown escpecially on the a) greater trochanter b) ankles c) occipital area d) sacrum 2) additional teaching is indicated when a family member visiting a patient in Droplet Isolation says I must. a) pinch the metal band on the mask around the bridge of my nose b) put on new mask...
A machine costs $460,000, has a $36,000 salvage value, is expected to last eight years, and...
A machine costs $460,000, has a $36,000 salvage value, is expected to last eight years, and will generate an after-tax income of $100,000 per year after straight-line depreciation. Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) A new operating system for an existing machine is expected to...
The amount of corn chips dispensed into a 13​-ounce bag by the dispensing machine has been...
The amount of corn chips dispensed into a 13​-ounce bag by the dispensing machine has been identified as possessing a normal distribution with a mean of 13.5 ounces and a standard deviation of 0.4 ounces. Suppose 50 bags of chips were randomly selected from this dispensing machine. Find the probability that the sample mean weight of these 50 bags exceeded 13.6 ounces. Round to four decimal places.
The Hammerlink Company has been offered an special-purpose metal-cutting machine for $110,000. The machine is expected...
The Hammerlink Company has been offered an special-purpose metal-cutting machine for $110,000. The machine is expected to have a useful life of eight years with a terminal disposal price of $30,000. Savings in cash operating costs are expected to be $25,000 per year. However, additional working capital is needed to keep the machine running efficiently and without stoppages. Working capital includes such items as filters, lubricants, bearings, abrasives, flexible exhaust pipes, and belts. These items must continually be replaced so...
The Group has been growing at 15% per yr in recent yrs. This expected to last...
The Group has been growing at 15% per yr in recent yrs. This expected to last for 3 more years. After 3 years, the growth rate is expected to decline to 4% indefinitely. The last dividend (paid yesterday) is $1.6 and the required return on the firms equity is 10%, whats the intrinsic value of the firms stock today? show work Instead the growth rate of 15% is expected to remain for the next 4 yrs and then level off...
1 GenLabs has been a hot stock the last few years, but is risky. The expected...
1 GenLabs has been a hot stock the last few years, but is risky. The expected returns for GenLabs are highly dependent on the state of the economy as follows: State of Economy Probability GenLabs Returns Depression .05    -50% Recession .10 -15 Mild Slowdown .20    5 Normal .30      15% Broad Expansion .20 25 Strong Expansion .15 40 Please calculate the expected return and standard deviation of the stock. 2. A year ago, an investor invested $4,000 in...
Project L costs $50,000, its expected cash inflows are $9,000 per year for 12 years, and...
Project L costs $50,000, its expected cash inflows are $9,000 per year for 12 years, and its WACC is 11%. What is the project's NPV? Project L costs $45,000, its expected cash inflows are $11,000 per year for 8 years, and its WACC is 8%. What is the project's discounted payback? Project L costs $54,892.28, its expected cash inflows are $11,000 per year for 10 years, and its WACC is 14%. What is the project's IRR? Project L costs $75,000,...
A project has an initial cost of $ 42,000, expected net cash inflows of $ 9,000...
A project has an initial cost of $ 42,000, expected net cash inflows of $ 9,000 per year for 7 years, and a cost of capital of 12%. What is the project’s NPV ? Please show the steps of your work.
The market-capitalization rate on the stock of Flexsteel Company is 12%. The expected ROE is 13%,...
The market-capitalization rate on the stock of Flexsteel Company is 12%. The expected ROE is 13%, and the expected EPS are $3.60. If the firm's plowback ratio is 50%, the P/E ratio will be
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT