Main Content Net Revenue Years 1 Investment You are thinking about buying a new Hot Dog cart for $7,760. Based on what the manufacturer tells you about maintenance costs and your estimate of revenues you should be able to make around $13,700 per year, for the next 7 years. Market value for the cart at that time should be about $450. According to the current asset class table the allowable depreciation rate for Hot Dog carts is 27%. If your business' tax rate is 49% and your after-tax MARR is 5%, what is the after tax annual worth of this investment? Use four decimal place accuracy for the CTF and CSF.

Main Content Net Revenue Years 1 Investment You are thinking about buying a new Hot Dog cart for $7,760. Based on what the manufacturer tells you about maintenance costs and your estimate of revenues you should be able to make around $13,700 per year, for the next 7 years. Market value for the cart at that time should be about $450. According to the current asset class table the allowable depreciation rate for Hot Dog carts is 27%. If your business' tax rate is 49% and your after-tax MARR is 5%, what is the after tax annual worth of this investment? Use four decimal place accuracy for the CTF and CSF.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Give typing answer with explanation and conclusion You are considering purchasing a CNC machine which costs $170,000. This machine will have an estimated service life of 12 years with a net after tax salvage value of $17,000. It's annual after tax operating and maintenance costs are estimated to be $49,000. To expect an 17% rate of return on investment, what would be the required minimum annual after tax revenues? i= 17% per year
Your company is considering the replacing an old machine with a more efficient model. The new machine costs $39,500, will last for 7 years and save $12,900 per year in expenses. The discount rate is 18% and the tax rate is 26%. The machine will be depreciated on a straight line basis to zero. The old machine is fully depreciated and can be sold today for $2,700. A) what is the amount of initial investment required? B) what is the after-tax gain on the sale of the old machine? The old machine is fully depreciated. C) what is the amount of operating cash flow (OCF) per year? D) what is the NPV of the project?
A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of the shown Table . If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet. By how much would the MARR have to change before the economic life decreases by one year? How about to increase the economic life by one year?
Total Smart Home is considering replacing an old machine with a Net Book Value of $12,500 and an estimated useful life of 5 years. The old machine can be sold for $1,500. A new machine to replace it can be purchased with a sticker price of $25,000. It will also have a useful life of 5 years and no residual value. We think the annual manufacturing costs will be reduced from $26,000 to $23,500 if we purchase the new machine. What is the differential income from the two alternatives?
Your company is planning to purchase a new loader for $20,937. If the company keeps the old loader, it will have $1,959 additional maintenance cost for the first year and increases $308 each year till the eighth year. Given the company's minimum attractive rate of return (MARR) is 6%, what is the present cost of keeping the old loader? 6% 1 2 3 4 5 879 6 9 Single Payment Compound Present Amount Worth Factor Factor Find F Find P Given F Given P F/P P/F 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1689 .9434 .8900 .8396 .7921 .7473 .7050 .6651 .6274 5919 Sinking Fund Factor Find A Given F A/F 1.0000 .4854 3141 .2286 .1774 .1434 .1191 1010 0870 Compound Interest Factors Uniform Payment Series Capital Recovery Factor Find A Given P A/P 1.0600 .5454 .3741 .2886 2374 2034 .1791 1610 1470 Compound Amount Factor Find F Given A F/A 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.897 11 491 Present Worth Factor Find P Given A P/A 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 Arithmetic…
Suppose you are a financial manager at a car rental company. The company recently purchased a batch of luxury cars that will be on the market for rent soon. The purchasing price of each car is $100,000 and the annual maintenance costs expect to be $15, 000 in year 1 through 5. These cars will be depreciated over 5 years using straight-line depreciatin and there will be no salvage value after that. Assume the required rate of return is 8% and the corporate tax rate is 21%. Now here comes a potential customer who is interested in renting the car for 5 years. Suppose the 5 lease payment will each occur at the beginning of the year. What is the pre-tax rental price you need to charge the customer in order for a break-even within these 5 years?
1. Peach Co. is considering purchasing a new tractor to harvest their premium catnip. The new tractor would cost $646,100 and have a useful life of 14 years and no salvage value. The tractor would allow more catnip to be harvested and increase sales revenue by $276,000 per year and operating expenses by $170,150 per year, including depreciation expense from the tractor. What is the accounting rate of return? Round your answer to 2 d.p. as a percent. For example, if you believe the answer is 10.71%, enter 10.71 2. Peach Co. spends $250,000 for a new catnip sorting machine. Peach Co. expects net cash inflows of $20,000 in the first year, $50,000 in the second year, and $25,000 over the following 10 years. What is the payback period? Round your answer to 2 d.p.
1. Peach Co. is considering purchasing a new tractor to harvest their premium catnip. The new tractor would cost $646,100 and have a useful life of 14 years and no salvage value. The tractor would allow more catnip to be harvested and increase sales revenue by $276,000 per year and operating expenses by $170,150 per year, including depreciation expenses from the tractor. What is the accounting rate of return? Round your answer to 2 d.p. as a percent. For example, if you believe the answer is 10.71%, enter 10.71 2. Peach Co. spends $250,000 for a new catnip sorting machine. Peach Co. expects net cash inflows of $20,000 in the first year, $50,000 in the second year, and $25,000 over the following 10 years. What is the payback period? Round your answer to 2 d.p.
Your firm is contemplating the purchase of a new $500,000 computer-based order entry system. The system will be depreciated using the MACRS 5-year depreciation schedule. It will be worth $80,000 at the end of the project in 6 years. You will save $50,000 before taxes per year in order processing costs, and you will be able to reduce net working capital by $70,000. You will also increase sales by $100,000 per year for the first year and this number will increase by 3% per year. If the tax rate is 30 percent, and the required rate of return is 10%, what is the NPV of this project? Must be done in excel and use cell referencing.
If you buy the new machine you will be able to sell the existing machine for $6,000. The new machine will cost $10,000 for delivery and installation, on top of the purchase price. Making your product more quickly is important because you currently cannot meet the demands of your orders. You are currently selling every widget you produce. The machine will cost $100,000 today and will require annual maintenance of $5,000 each year (except for the final year), starting at the end of the first year. You expect that your machine will last for 8 years before you need to purchase the next machine. At that time, you expect you will be able to sell the machine for $7,800. You can buy the machine now and have it delivered and installed by tomorrow. You expect that you will sell 2,000 more widgets in year 1 and that this number will increase by 20% each year for the next 4 years after that before leveling off at that level of sales for the remaining years you own the machine. You can obtain more…