A corporation purchased a machine for $65,000 four years ago. It had an estimated life of 10 years and an estimated salvage value of $8,000. The current BV of this machine is $33,000. If the current MVof the machine is $40,500 and the effective income tax rate is 22%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Choose the correct answer below. OA. $42,150 OB. $31,620 OC. $40,500 OD. $38,850 OE. $33,460

A corporation purchased a machine for $65,000 four years ago. It had an estimated life of 10 years and an estimated salvage value of $8,000. The current BV of this machine is $33,000. If the current MVof the machine is $40,500 and the effective income tax rate is 22%, what is the after-tax investment value of the machine? Use the outsider viewpoint. Choose the correct answer below. OA. $42,150 OB. $31,620 OC. $40,500 OD. $38,850 OE. $33,460

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

A company has decided to buy a machine for $50,000. It will depreciate the machine on a straight-line basis over its useful life of five years. The tax rate of the company is 40% and the proper discount rate 10%. The following tables gives the resale value, S of the machine and its pretax revenue, E. The company has the option to keep or sell the machine at any time. What is the optimal time to replace the machine?
A company with a 34% marginal income tax rate is considering the purchase of a $75,000 piece of equipment that is classified as 3-year property in the MACRS depreciation schedule. The equipment will provide the following estimated benefits in Year 1-5. Year Before-Tax Cash Flow 0 −$75,000 1 $10,000 2 $25,000 3 $50,000 4 $15,000 If the company purchases the equipment, how much income tax will it owe in Year 3? Group of answer choices $13,223 $17,000 $25,500 No income tax is owed
Blue Inc. is considering producing a short-lived fad item, which it estimates will have a project life of three years. The only fixed assets it will need to purchase is some machinery which costs $120,000, plus $10,000 to modify it for this project's use. The machinery will be depreciated using the MACRS 5-year property class schedule, and Blue estimates that the machinery could be sold at the end of the third year for $70,000. In addition to expenditures on fixed assets, this project would cause the firm's cash needs to increase by $15,000 and additional raw materials inventory will go up by $5,000, both at Time 0. It also estimates that by the end of Year 1, accounts receivable will rise by $6,000. The new product's sales revenues are expected to be $90,000 each year. Total costs excluding depreciation are estimated to be $30,000. The company's marginal tax rate is 34 percent, and the firm estimates is overall WACC to be 16.00 percent. Inflation is zero. What are the project's NPV…
Machine X costs $248,751 with annual operating and maintenance costs of $9,980. Machine Y costs $264,500 with annual operating and maintenance costs of $5120. Both machines are Class 43 (CCA=30%). The company needs the machines for 11 years, after which machine X can be sold for $12,257 and machine Y can be sold for $13,033. The company’s MARR is 10%, and its tax rate is 27%. Do an after-tax analysis to determine which machine should be purchased.
A manufacturer purchased and installed a shrink-wrap machine 4 years ago at a cost of $4,000. A new machine is now needed, and one is available for $7,000 less a $1,000 trade-in allowance for the old machine. The market value of the old machine without trade-in on a new model is $500. Which of the four dollar values above is a sunk cost that is irrelevant in a pre-tax engineering economic analysis? Group of answer choices $7,000 $1,000 $4,000 $500 Flag question: Question 8
A small manufacturing company has an estimated annual taxable income of $195,000. Due to an increase in business, the company is considering purchasing a new machine that will generate additional (before-tax) annual revenue of $80,000 over the next five years. The new machine requires an investment of $100,000, which will be depreciated under the five-year MACRS method.(a) What is the increment in income tax caused by the purchase of the new machine in tax year 1?(b) What is the incremental tax rate associated with the purchase of the new equipment in year 1?
An equipment cost P 700 has a life of 8 years and a salvage value of X after 8 years. The book value at the 4th year using SYD method is P 2,197.22. Compute the depreciation in the first year by SYD method. Select one: a. P 1,286 b. P 1,220 c. P 1,478 d. P 1,322*please do not use excel
Consider the following information for year 1 of a project using equipment that had an initial cost of $100,000, and an estimated salvage value of $10,000 at disposal: BTCF = $16,000MACRS 10-year property classState & Federal Combined Income Tax Rate: 45% What is the ATCF for year 1?
Given: Before -Tax Cash Flow (BT-CF) for Kal Tech Systems in 2012 for an equipment that will be depreciated using the SL method with salvage value of $10,000. Year 0 1 2 3 4 5 BT-CF -$120,000 32,000 32,000 32,000 32,000 32,000 Market value - $36,000 What is the after-tax return if the company is in the 34% income tax bracket? The incremental tax rate is 34%. Also, it is known that the before-tax return is 16.65% Group of answer choices 9.65% 11.29% 10.16% 10.99%
Identify the basic solution described by each event below: gross income, depreciation, operating expense, taxable income, income tax, or net operating profit after taxes.(a) A new machine had a first-year write-off of ₱10,500(b) A public corporation estimates that it will report a ₱−750,000 net profit on its annual income statement.(c) An asset with a book value of $8000 was retired and sold for ₱8450.(d) An over-the-counter software system will generate ₱420,000 in revenue this quarter.(e) An asset with a MACRS recovery period of 7 years has been owned for 10 years. It was just sold for ₱2750.(f ) The cost of goods sold in the past year was ₱3,680,200.(g) A convenience store collected ₱33,550 in lottery ticket sales last month. Based on winners holding these tickets, a rebate of ₱350 was sent to the manager.(h) An asset with a first cost of $65,000 was utilized on a new product line to increase sales by ₱150,000.(i) The cost to maintain equipment during the past year was ₱641,000.
An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the fifth year of life by each of these methods: (7.3, 7.4) a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS.
1. A machine costs $ 10,000 and is expected to be scrapped for $ 1,500 inthe moment he retires. Operating expenses for the first year are expected to be$ 3,500 and increasing by $ 400 as a result of the impairment; and operating incomeEstimated $ 20,000 If the MARR is 15%, determine the economic life of the machine.