St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $181,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $73, 500 per year. The new machine will be depreciated over its 5- year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20 %, 11.52 %, 11.52 %, and 5.76 %. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
Q: You are considering the following two projects and can take only one. Your cost of capital is 10.6%.…
A: IRR of a project is the discount rate which makes net present value of the project equals to zero.…
Q: Jennifer is planning her retirement. She currently has $6,783 in an IRA account that will return 8%…
A: Deposit = $6783Return = 8%Yearly savings = $2000Return = 7%Years until retirement =32To find: the…
Q: You are trying to calculate how much money you should have at retirement. On your 55th birthday you…
A: TVM refers to the concept that considers the effect of money's interest-earning capacity, which…
Q: 1) Use the YIELD function in Excel to calculate the Yield to Maturity. Verify in Excel that you…
A: The yield to maturity indicates the overall return an investor can anticipate from a bond if they…
Q: Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 2…
A: The FV of an investment refers to the cumulative worth of the investment's cash flows at a future…
Q: calculate the present value (in $) of the ordinary annuity. (Round your answer to the nearest cent.)…
A: An annuity refers to a series of cash flows that are made at regular intervals. Here the amount of $…
Q: Consider a bond selling at par with a coupon rate of 6% and 10 years to maturity. The issuer makes…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: Airodyne Wind, Inc., has wind tunnels that can operate vertically or horizontally for evaluating the…
A: First Cost (C) = $ -570000Replacement Cost,(R) Year 2 (n1) = $…
Q: Bond value and time-Constant required returns Pecos Manufacturing has just issued a 15-year, 12%…
A: Present value:The present value is a financial concept that describes the current value of a future…
Q: Given the following information, calculate the debt ratio percentage: Liabilities $24,000 Liquid…
A: Debt ratio is a financial metric that measures a company's assets relative to its liabilities and…
Q: Problem 6.25 Suppose that A(1) $110, A(2) = $121, and A(10) $259.37. (a) Find the effective rate of…
A: Alternatively,
Q: At January 1, 2024, Café Med leased restaurant equipment from Crescent Corporation under a nine-year…
A: A lease is defined as a contractual agreement incorporated between two business entities where one…
Q: Your car dealer is willing to lease you a new car for $399 a month for 48 months. Payments are due…
A: The monthly payment is $399.The period of the lease i 48 months.The cost of money is 3%.
Q: Data for Barry Computer Co. and Its Industry averages follow. The firm's debt is priced at par, so…
A: Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: Silastic-LC-50 is a liquid silicon rubber designed to provide high clarity, superior mechanical…
A: Present Value Factor (PVF) can be calculated using the given formula:Where:r is the discount rate…
Q: Ladders, Inc. has a net profit margin of 5.4% on sales of $49.3 million. It has book value of equity…
A: Profitability ratios refer to the type of ratios that evaluate the financial performance of the…
Q: You are considering making a movie. The movie is expected to cost $10.1 million up front and take a…
A: The payback period is an easily comprehensible and basic statistic. It offers a brief evaluation of…
Q: To establish a "rainy day" cash reserve account, a certain company deposits $11,000 of its profit at…
A: The future value of an annuity is the total value of all periodic payments made into the annuity,…
Q: McCann Company has identified an investment project with the following cash flows. Year 1 234 Cash…
A: Cash Flow for Year 1 = cf1 = $900Cash Flow for Year 2 = cf2 = $1000Cash Flow for Year 3 = cf3 =…
Q: Present Value of an Annuity What is the present value of a $1,600 annuity payment over 6 years if…
A: An annuity refers to a series of cash flows occurring at regular periodic intervals. Here the amount…
Q: The Bandon Pine Corporation's purchases from suppliers in a quarter are equal to 65 percent of the…
A: Cash budget is that which is prepared in every organization. It helps in future cash maintenance for…
Q: 4-30. Last week Evelyn moved into the new house she purchased, and she is already making plans to…
A: Loan installment is that which is paid by borrower to lender for a specified period of time. This…
Q: Millicent is planning to travel to the United States of America in 3 year - time. She estimated that…
A: Present value of money refers to the concept that a dollar in the present is worth more than a…
Q: 4. Loan Repayment Strategy: You took out a loan of $15,000 for a home improvement project, and the…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: Calculate the future value of the following annuities, assuming each annuity payment is made at the…
A: The Future Value of Annuity represents the total value of a series of equal payments or cash flows…
Q: Assume a fund has $100 million and a target gross exposure of 180% and a target net exposure of 50%.…
A: Gross exposure in finance refers to the company's investment including both long and short…
Q: Amount Deposit m $900 Frequency Rate Time n r annually 1% 35 yr
A: Future value of the annuity The worth of a set of normal payments at a future date, presumptuous at…
Q: A company invests $600,000 in a project with the following net cash flows: Year 1: $130,000 • Year…
A: Payback period is the period in which investment will we recovered through cash inflow. It is a…
Q: We are evaluating a project that costs $735, 200, has an eight year life, and has no salvage value.…
A: Price and quantity are 15% less than estimated figures in the worst case and whereas, variable costs…
Q: To help pay for college, you worked part-time at a local restaurant, earning $22,000 in wages and…
A: The objective of the question is to calculate the FICA taxes for a part-time worker who earned…
Q: The balance sheet provides a snapshot of the financial condition of a company. Investors and…
A: ----------
Q: JC Penney has sales of $897,400, costs of goods sold of $628,300, inventory of $208,400, and…
A: Inventory balance of JC Penny = $208400Accounts receivable balance = $74100Cost of goods sold =…
Q: Required information Assume you pay the reduced amount of $4,405 for a corporate stock that has a…
A: Present value:A financial concept known as "present value" shows how much a future cash flow or…
Q: The semistrong-form of market efficiency states that O current market prices do not reflect any…
A: Semi-strong form of efficient market hypothesis suggests that stock market prices reflect all the…
Q: You have been scouring The Wall Street Journal looking for stocks that are "good values" and have…
A: To solve this question we will apply the concept and theory of CAPM here.CAPM stands for Capital…
Q: Use the following information to solve for SIX QUESTIONS BELOW. Therefore, questions (#16 - #21)…
A: Effective annual rate refers to the return that is being earned through the investment made during…
Q: the simple is valid and all portfolios are priced correct hich of the situations below is possible?…
A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…
Q: andra has just signed a 7-year lease for her new business. The full annual lease amount is due at…
A: Annual lease=$25918Period=n=7years.Interest rate=8%Growth rate=4%
Q: L ast year Leather Boot, Inc. had investments in Paris worth 470,000 euros. At that time, the euro…
A: Investments worth = 470,000 EurosExchange rate at the time of investment = $ 1.14/EuroExchange rate…
Q: You've just opened a margin account with $33,880 at your local brokerage firm. You instruct your…
A: Margin account=$33880Number of shares=800Purchase price=$77Selling price=$84Call money rate=6.5% and…
Q: a. Compute the payments at the beginning of each year (BOY). b. What is the loan balance at the end…
A: Monthly payments refer to the specified amount that a borrower is required to repay on a loan each…
Q: Compute to the penny the present value of $5,000 dollars to be paid at the end of four years if (a)…
A: Future value is a financial concept that refers to the projected value of an investment or asset at…
Q: Free cash flow valuation Nabor Industries is considering going public but is unsure of a fair…
A: Here, Constant Growth Rate after 5 years3%Average Cost of Capital13%Market Value of Debt $…
Q: QID 204. 8 years from now you will need $750,000 to renovate a rental property. At an interest rate…
A: Amount required in 8 years = $750,000Interest rate = 9% (Compounding semi-annually)Number of years =…
Q: The New Fund had average daily assets of $2.7 billion in the past year. New Fund's expense ratio was…
A: Direct expenses include operating costs related to the day-to-day management and support of the…
Q: If a company has a business development plan for 8 years, it makes an initial capital investment of…
A: YearsNet cash…
Q: The president of Orlando Corporation has asked you to evaluate the proposed acquisition of new…
A: The objective of the question is to evaluate whether Orlando Corporation should purchase the new…
Q: e cash flow is Question 4Select one: Cash flow from operations plus investment Cash flow from…
A: Efficient management of cash flow is vital for any business to thrive. One crucial aspect of…
Q: Lamont, a CFP® professional, has developed a financial plan for his client. Based on the CFP Board…
A: In the realm of financial planning, adherence to professional standards and a structured approach to…
Q: Consider three N-year bonds. The bonds all have the same par value and are all redeemable at par.…
A: A bond refers to an instrument used by the issuing organization to raise debt capital from…
Step by step
Solved in 3 steps
- Although the Chen Company’s milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 25%. Should Chen buy the new machine?St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $180,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $27,000 to $81,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20 %, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. $t. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $29,000 to $78,500 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 25%, and the project cost of capital is 15%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
- Saint John River Shipyard's welding machine is 15 years old, is fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $182, 500 and have an estimate life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase annual cash flows before taxes (not including any CCA tax shield effects) from $27,000 to $74,000 per year. The new welder falls into Class 43 with a CCA rate of 30%. The applicable corporate tax rate is 25%, and the project cost of capital is 12%. What is the NPV if the firm replaces the old welder with the new one?Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method. Complete the following table to compute the net present value (NPV) of the investment. (Hint: Remember that, in Year 10, Alliances also receives the salvage value of the machine.) Year Cash Flow PV Interest Factor at 14%…Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. However, it is in good working condition with an expected life of 10 additional years. The new drill press is more efficient than the existing one and, if installed, will provide an estimated cost savings (in labor, materials, and maintenance) of $6,000 per year. The new machine costs $25,000 delivered and installed. It has an estimated useful life of 10 years and a salvage value of $1,000 at the end of this period. The firm’s cost of capital is 14 percent, and its marginal income tax rate is 40 percent. The firm uses the straight-line depreciation method.a. What is the net cash flow in year 0 (i.e., initial outlay)?b. What are the net cash flows after taxes in each of the next 10 years?c. What is the NPV of the investment?d. Should Alliance replace its existing drill press?
- The Oviedo Company is considering the purchase of a newmachine to replace an obsolete one. The machine being used for the operation has a bookvalue and a market value of zero. However, the machine is in good working order and willlast at least another 10 years. The proposed replacement machine will perform the operationso much more efficiently that Oviedo’s engineers estimate that it will produce after-taxcash flows (labor savings and depreciation) of $8,000 per year. The new machine will cost $45,000 delivered and installed, and its economic life is estimated to be 10 years. It has zerosalvage value. The firm’s WACC is 10%, and its marginal tax rate is 35%. Should Oviedobuy the new machine?X Company is using a fully depreciated machine having a current market value of 20,000. The salvage value of the machine eight years from now would be zero. The company is considering replacing this machine by a new one costing 1,02, 500, and having an estimated salvage value of 12,500. With the use of the new machine, annual sales are expected to increase from 80,000 to 92, 500. Operating efficiencies with the new machine will save 12,500 per year as operating expenses. Depreciation will be charged on written - down basis at 25 per cent. The cost of capital is 11 per cent. The new machine has a 8-year life and the company's taxation rate is 35 per cent. Assume that book profit or loss from the sale of the asset is taxable at corporate tax rate. Should the company replace the old machine? Show calculations on incremental cash flow basis. How would your decision be affected if another new machine is available at a cost of 1,75,000 with a salvage value of 25,000. The machine is expected…A packaging factory is considering the replacement of some equipment. The new plan is to install equipment to produce a new can that uses less energy and less metal than the old one. Current equipment was installed 5 years ago for $100 million and can be sold for $35 million. Due to obsolescence the depreciation of this equipment results in an annual depreciation of $4 million for the next years. If you keep this equipment for one more year your operating and maintenance costs will be $65 million increasing by $3 million/year each year thereafter. The new equipment will cost $130 million, with an economic life of 8 years and a salvage value of $10 million. Its operating and maintenance costs will be $49 million. For a TMAR = 15% p.a. what new equipment should be installed? Make a recommendation about it. (Answer: The solution would be to use the current equipment for another two years and then exchange it for new equipment.
- Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don’t replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don’t expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…Tyrell Corp. is considering replacing a machine. The old one is currently being depreciated at $70,000 per year (straight-line), and is scheduled to end in five years with no remaining book value. If you don't replace it, you will be lucky to get it removed for the amount you could salvage it for, so you don't expect any profit in five years. If you replace the old machine now, you believe you can salvage it for $375,000 and buy a new machine for $850,000, plus $25,000 shipping fee and another $25,000 for installation. The new machine will not change the revenue or NOWC, but it will reduce the operating costs of the company by $145,000 per year. The new machine will be depreciated using the three-year MACRS schedule (the table is provided on the Moodle for your convenience). The useful life of this machine is five years, and it is expected that the machine can be sold at $20,000 at the end of the five years. Assume a tax rate of 25% and the cost of capital for the company is 8%.…The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can be sold for $60,000. This machine is totally depreciated. The replacement machine would cost $125,000 and have a 5-year expected life over which it would be depreciated down using the straight-line method and have no salvage value at the end of five years. The new machine would produce savings before depreciation and taxes of $45,000 per year. Assuming a 34 percent marginal tax rate and a required return of 10%, calculate The internal rate of return and the net present value. Please show work in Excel.