A $64,000 machine with a 8-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $83,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $9,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?

Q: B2B Co. is considering the purchase of equipment that would allow the company to add a new product…

A: As per the given information: Cost of equipment purchased - $376,000 Life of equipment - 8-year life…

Q: A $73,000 machine with a 10-year class life was purchased 6 years ago. The machine will now be sold…

A: Book value of old machine = cost - depreciation

Q: A company is considering to acquire a new machinery. It costs ₱90,000 with transportation costs of…

A: a) Calculation of depreciation per annum :       Calculation of Machinery cost = 90000 + 6000 + 9000…

Q: Daily Enterprises is purchasing a $4.1 million machine. It will cost $66,000 to transport and…

A: Before investing in new asset or project, profitability is evaluated by considering future generated…

Q: Gemini, LLC, invested $1 million in a state-of-the-art information system that promises to reduce…

A: Computation of After-tax net present value of Gemini new information system is as follows:

Q: Holmes Manufacturing is considering a new machine that costs $275,000 and would reduce pretax…

A: Accorrding to the rule, we will answer the first three subparts, for the remaining subparts, kindly…

Q: The Quick Manufacturing Company, a large profitable corporation, may replace a production machine…

A: IRR is the rate of return a project generates in its lifetime expressed in annual terms. It is…

Q: A company is planning to purchase a machine that will cost 240,000, have a six-year life, and be…

A: Answer is option d) 25%

Q: Holmes Manufacturing is considering a new machine that costs $285,000 and would reduce pretax…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: Holmes Manufacturing is considering a new machine that costs $275,000 and would reduce pretax…

A: Please find the answers to the above questions below:

Q: Phoenix Construction Ltd. is considering the acquisition of a new 18-wheeler. The truck's base…

A: Given information: The cash flow of different project is shown in the table below,

Q: ABC, Inc is considering launching a new product which incurred $2.5 million in Research and…

A: NPV is an important concept in capital budgeting that is used to decide on weather to accept the…

Q: Allen Air Lines must liquidate some equipment that is being replaced. Theequipment originally cost…

A: After-tax net salvage value is the net amount received from the sale of fixed asset. Net amount…

Q: Holmes Manufacturing is considering a new machine that costs $290,000 and would reduce pretax…

A: "Since you have posted multiple questions with multiple sub-parts, we have solved the first three of…

Q: A $58,000 machine with a 9-year class life was purchased 2 years ago. The machine will now be sold…

A: An increase or decrease in the cash flow of a company from the acceptance of a project is termed as…

Q: In a capital budgeting analysis, what is the cash outflow at time 0 (initial investment) that Beast…

A: Net present value (NPV) of an alternative refers to the variance between the initial investment or…

Q: Kennon Corporation is planning to replace an old machine. The annual cost of operating the old…

A: The question is related replacement problem of Capital Budgeting. The details are given.  The IRR is…

Q: A company is considering replacing an old piece of machinery, which cost $597,400 and has $349,000…

A: Variable productions costs (old machine) = Annual Variable productions costs x 8 years = $157,900 x…

Q: Autonumerics, Inc. has just invested $600,000 in a manufacturi11g process that is estimated to…

A: Internal Rate of Return (IRR) is the required rate of return at which the present value of cash…

Q: Nozark Corp. is now in the final year of a project.  The equipment originally cost $9,179, and the…

A: Book value =$736 Sale price of equipment =$2448 Tax rate =30%

Q: An industrial organization has established an automated assembly line (for $240,000) that will…

A: a) Before Tax Cash Flow (BTCF) and After-Tax Cash Flow (ATCF) can be computed as follows: Result…

Q: A firm is planning to purchase a new machine costing ₱2,800,000 with freight and installation costs…

A: Working Note # 1 Proceeds from sale of old assets                       = ₱ 52000 Tax Savings…

Q: A $85,000 machine with a 9-year class life was purchased 3 years ago. The machine will now be sold…

A: The initial outlay for the project can be calculated by deducting the selling value of the old…

Q: A company is planning to purchase a machine that will cost $30,600 with a six-year life and no…

A: The accounting rate of return can be evaluated by dividing net income by average investment. We can…

Q: you have been asked by the president of your company to evaluate the proposed acquisition of a new…

A: The computation of operating cash flow for year 2: Hence, the operating cash flow for year 2 is…

Q: Equipment associated with manufacturing small railcars had a first cost of $250,000 with an expected…

A: Business organizations are required to charge the depreciation expense so that the assets are shown…

Q: A company is planning to augment its production capacity through equipment additions that will cost…

A: Additional cost (C) = $350000 Increase in income (x) = $250000 Increase in costs (y) = $150000 n = 5…

Q: A computer-controlled milling machine will cost Ajax Manufacturing $65,000 to purchase plus $4700 to…

A: Value of machine or asset value = Cost of machine + Installation charges Depreciation = ( Asset…

Q: Granfield Company has a piece of manufacturing equipment with a book value of $48,500 and a…

A: Working Note: Total savings in variable manufacturing costs = Annual decrease in variable…

Q: B2B Co. is considering the purchase of equipment that would allow the company to add a new product…

A: Net present value is the difference between the present value of cash flow and initial investment…

Q: A $63,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold…

A: Cash flow statement represents the cash inflow and cash outflow due to operating, financing and…

Q: A firm has invested $60,000 in machinery with a 5-year useful life. The machinery will have no…

A: Given information: Initial investment amount is $60,000 Annual benefits amounted to $15,000 for 5…

Q: A company is considering replacing an old piece of machinery, which cost $400,000 and has $175,000…

A: Sunk cost means the cost incurred in past and do not have any effect on the current decision-making…

Q: Arvada Co. is considering the purchase of equipment that would allow the company to add a new…

A: Capital budgeting is used to evaluate the projects. With the help of capital budgeting, the…

Q: Daily Enterprises is purchasing a $10.1 million machine. It will cost $52,000 to transport and…

A: Calculation of  incremental cash flows of the project : a) Depreciation: Depreciation for each year…

Q: A machine that costs $12,000 is expected to operate for 10 years. The estimated salvage value at the…

A: IRR is the internal rate of return at which the discounted cash inflow is equivalent to outflow. The…

Q: A $62,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold…

A: An increase or decrease in the cash flow of a company from the acceptance of a project is termed as…

Q: The manufacture of folic acid is a competitive business. A new plant costs $100,000 and lasts for…

A: The company evaluates the projects based on cost and benefits. When a company has several options…

Q: A $65,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold…

A: Capital budgeting is a technique to forecast the profitability of an investment opportunity. The…

Q: A computer-controlled milling machine will cost Ajax Manufacturing $65,000 to purchase plus $4700 to…

A: a) Assumption: It is assumed that the tax rate is 40%.

Q: A firm is planning to purchase a new machine costing ₱2,600,000 with freight and installation costs…

A: Net Investment = Total investment - ( Trade-in-allowance for old machine + Salvage of other assets )

Q: A construction company is considering the proposed acquisition of a newearthmover. The purchase…

A: purchase price = $100000 additional amount for repairing = 25000 machine depreciates under maccrs…

Q: ABC, Inc is considering launching a new product which incurred $2.5 million in Research and…

A: Since there are several subparts to the question, we will answer the first three. Please repost the…

Q: GoHigher is planning to purchase a machine that will cost $24,000. It has a six-year life with no…

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: A company is considering replacing an old piece of machinery, which cost $597,100 and has $352,000…

A: Variable productions costs = annual variable production costs x no. of years old machine = $155,100…

Q: Power Manufacturing has equipment that it purchased 6 years ago for $2,500,000. The equipment was…

A: cost of machine = $2,500,000. useful life = 8 years annual depreciation is =  $2,500,000/8 = 312,500…

Q: replacing an old piece of machinery, which cost $168,000 and has $88,000 of accumulated depreciation…

A: Depreciation: It refers to the gradual decrease in the value of an asset due to normal wear and tear…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.