is planning to acquire a new machine at a total cost of P360,000. The estimated life of the machine is 6 years with no salvage value. The straight-line method of depreciation will be used. NUBD estimates that the annual cash flow from operations, before income taxes, from using this machine amounts to P90,000. Assume that NUBD’s cost of capital is 8% and the income tax rate is 40%. (Use 3 decimal places for the PV factors)What would be the net present value?

is planning to acquire a new machine at a total cost of P360,000. The estimated life of the machine is 6 years with no salvage value. The straight-line method of depreciation will be used. NUBD estimates that the annual cash flow from operations, before income taxes, from using this machine amounts to P90,000. Assume that NUBD’s cost of capital is 8% and the income tax rate is 40%. (Use 3 decimal places for the PV factors)What would be the net present value?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

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NUBD Co. is planning to acquire a new machine at a total cost of P360,000. The estimated life of the machine is 6 years with no salvage value. The straight-line method of depreciation will be used. NUBD estimates that the annual cash flow from operations, before income taxes, from using this machine amounts to P90,000. Assume that NUBD’s cost of capital is 8% and the income tax rate is 40%. (Use 3 decimal places for the PV factors)What would be the payback period for the machine?
NUBD Co. is planning to acquire a new machine at a total cost of P360,000. The estimated life of the machine is 6 years with no salvage value. The straight-line method of depreciation will be used. NUBD estimates that the annual cash flow from operations, before income taxes, from using this machine amounts to P90,000. Assume that NUBD’s cost of capital is 7% and the income tax rate is 40%. (Use 3 decimal places for the PV factors)What would be the net present value?
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Addison Corp. is considering the purchase of a new piece of equipment. The equipment will have an initial cost of $960,000 a 4 year life, and no salvage value. If the accounting rate of return for the project is 6%, what is the annual increase in net cash flow? Ignore income taxes.A.) $57,600B.) $182,400C.) $240,000D.) $297,600
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Sad Company is considering the purchase of a new machine that would cost $80,000. The machine would have a useful life of 8 years. Sad Company plans on using straight-line depreciation with an estimated salvage value of $0. Sad Company has a hurdle rate of 12% and is subject to an income tax rate of 80%. The annual cash income is estimated to be $50,000. PV . 1- The Accounting Rate of Return (AROR) is: 10 % 11 % 12 % 9 % 8 % 2-The Net Present Value (NPV) is: $10,424 $9,424 $11,424 $8,424 $11,424 3-The Profitability Index (PI) is: 1.02 1.12 1.22 0.92 0.82 The Payback period is: A. 4.044 years B. 4.144 years C. 4.244 years D. 4.344 years E. 4.444 years Using interpolation, the Internal Rate of Return (IRR) is: 14.4 % 13.4 % 12.4 % 15.4 % 16.4 %
Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new equipment is expected to increase production and decrease costs, with a resulting increase in profits. First Cost is at $40,000; Savings per year is $10,000; Actual useful life is 5 years; Salvage value is $4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation. b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0). PLEASE SHOW GIVEN AND REQUIRED THANK U
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Dorothy & George Company is planning to acquire a new machine at a total cost of $62,100. The machine's estimated life is 6 years and its estimated salvage value is $600. The company estimates that annual cash savings from using this machine will be $13,000. The company's after-tax cost of capital is 7% and its income tax rate is 40%. The company uses straight-line depreciation. (Use Appendix C, Table 1 and Appendix C, Table 2.) (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round answers to the nearest dollar amount.) Required: 1. What is this investment's net after-tax annual cash inflow? 2. Assume that the net after-tax annual cash inflow of this investment is $9,000; what is the net present value (NPV) of this investment? 3. What are the minimum net after-tax annual cost savings that make the proposed investment acceptable (i.e., the dollar cost savings that would yield an NPV of $0)? Hint: Redo the NPV analysis by setting the NPV…
Henerhiya Co. is planning to buy a machine costing P84,000 to be depreciated on the straight-line method basis over 10 degrees years life. The related cash flow from operations, net of income taxes, is expected to be P10,000 a year for each of the first 6 years and P12,000 for the next 4 years. It was also estimated that the salvage value of the project at the end of year 1 to be P60,000 and decreases by P5,000 each year thereafter, provided further that at the end of 10 years, the machine has no salvage value. Compute the payback bailout period in years.
A company is considering purchasing an asset for P60,000 that would have a useful life of 5 years and would have a salvage value of P7,000. For tax purposes, the entire original cost of the asset would be depreciated over 5 years using the straight-line method and the salvage value would be ignored. The asset would generate annual net cash inflows of P27,000 throughout its useful life. the project would require additional working capital of P1,000 which would be released at the end of the project. The company’s tax rate is 30% and its discount rate is 10%. What is the net present value of the asset?