N4 A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $26,000 and replaced by a newer model having a purchase price of $38,500; or it can be kept in service for a maximumof one more year. The new assembly machine, if purchased, has a useful life of not more than two years. If the before-tax MARR is 18%, when should the old assembly machine be replaced? Use the following data table for your analysis.ChallengerDefenderYearMarket ValueO&M CostsMarket ValueO&M Costs$38,500$26,000130,000$8,50016,500$13,500226,00012,500Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year. The minimum EUAC value of the challenger is $(Round to the nearest dollar.)The marginal cost of keeping the defender in service for one more year is $. (Round to the nearest dollar.)The old assembly machine should be replaced

The capital recovery cost (average first cost) reduces as the equipment's life span increases, while…

Answered: A high-speed electronic assembly…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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On 2021 January 2, a new printing machine was acquired for $900,000. The machine has an estimated salvage value of $100,000 and an estimated useful life of 10 years. The machine is expected to produce a total of 500,000 units of election materials throughout its useful life. Compute depreciation for 2021 and 2022 using each of the following methods: Straight line. Units of production (assume 30,000 and 60,000 units were produced in 2021 and 2022, respectively). Double-declining balance.
A stamping machine is classified as seven-year MACRS property. The costbasis for the machine is $120,000, and the expected salvage value is $10,000 at the end of 12 years. Compute the book value at the end of three years for tax purposes.
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…
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?
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?
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?
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A construction company is considering acquiring a new earthmover. The purchase price is $105,000,and an additional $28,000 is required to modify the equipment for special use by the company. The equipment falls into the MACRS seven-year classification (the tax life), and it will be sold after five years (the project life) for $55,000.The purchase of the earthmover will have no effect on revenues, but the machine is expected to save the firm $70,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21%. Assume that the initial investment is to be financed by a bank loan at an interest rate of 6% payable annually. Determine the after-tax cash flows by using the generalized cash flow approach and the worth of the investment for this project if the firm's MARR is known to be 11%.
A present asset (defender) has a current market value of $85,000 (year 0 dollars). Estimated market values at the end of the next three years, expressed in year 0 dollars, are MV1= $73,000, MV2 = $60,000, MV3 = $40,000. The annual expenses (expressed in year 0 dollars) are $15,000 and are expected to increase at 4.5% per year. The before-tax nominal MARR is 15% per year. The best challenger has an economic life of five years and its associated EUAC is $39,100. Market values are expected to increase at the rate of inflation which is 3% per year. Based on this information and a before-tax analysis, what are the marginal costs of the defender each year and when should you plan to replace the defender with the challenger?

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