[5] Garrison Corporation is considering the replacement of an old machine that is currently beingused. The old machine has a book value of $28,000. If Garrison decides to replace the old machine,Picco Company has offered to purchase it for $60,000 on the replacement date.Garrison has a tax rate of 40%. What is the after-tax cash flow associated with the salvage ofthe old machine?A. $32,000B. $36,000C. $47,200D. $40,800

Solution: Sale value of old machine = $60,000 Book value = $28,000 Gain on sale = $60,000 - $28,000…

Answered: [5] Garrison Corporation is considering…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 5PROB

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Garrison Corporation is considering the replacement of an old machine that is currently being used. The old machine has a book value of $28,000. If Garrison decides to replace the old machine, Picco Company has offered to purchase it for $60,000 on the replacement date. Garrison has a tax rate of 40%. What is the after-tax cash flow associated with the salvage ofthe old machine? A. $32,000B. $36,000C. $47,200D. $40,800
14) Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $11.2 million, of which 75% has been depreciated. The used equipment can be sold today for $3.2 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. ________$
2. The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $302,000. a. What is the book value of the equipment? b. If Jones sells the equipment today for $184,000and its tax rate is 21%, what is the after-tax cash flow from selling it? Note: Assume that the equipment is put into use in year 1. a. What is the book value of the equipment? The book value of the equipment after the third year is $____ (Round to the nearest dollar.) b. If Jones sells the equipment today for $184,000 and its tax rate is 21%, What is the after-tax cash flow from selling it? The total after-tax proceeds from the sale will be $____ (Round to the nearest dollar.)
Consider the case of Alexander Industries: Alexander Industries is considering a project that requires an investment in new equipment of $3,570,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t = 0 so the equipment will be fully depreciated at the time of purchase. Alexander estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals). The company's tax rate is 25%. a. The after-tax cost of Alexander’s new equipment is ___ . b. Alexander’s initial net investment outlay is ___ . c. Suppose Alexander’s new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital (NOWC) investment. Remember, that under the new tax law, this equipment was fully depreciated at…
H5. St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $44,000 per year. The new machine will cost $82,500, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firm's WACC is 12%. The old machine has been fully depreciated and has no salvage value. What is the NPV of the project? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
Karsted Air Services is now in the final year of a project. The equipment originally cost $24 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $10 million, and its tax rate is 20%. What is the equipment's after-tax salvage value? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar.

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