Question

Purchase price of a new machine is $84000 and the useful life of the machine is...

Purchase price of a new machine is $84000 and the useful life of the machine is 6 years. At the end of 6 years, salvage value of machine is zero. Before tax earning from the new machine is $ 23000. The effective income tax rate is %40 and the after tax MARR %12. Using SL depreciation method, show the before tax and after tax cash flow in a table. ( Including depreciation, taxable income and tax payments for each year) and calculate after tax IRR value for this investment. Is this a good investment ?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

No this is not a good investment as IRR is less than MARR

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company wants to replace old machine by new one. Old is fully depreciated and no...
A company wants to replace old machine by new one. Old is fully depreciated and no salvage value is expected. New will provide annual cash saving by $7.000 before income taxes and without regard to the effect of depreciation. Machine (new) costs $18.000 , estimated useful life is 5 years. No salvage value will be for the n ew one. Straight line depreciation method will be used. Income tax is %40. Desired rate of return is %14. Please evaluate this...
The company "ABCD" is considering to make a new investment by purchasing a new machine for...
The company "ABCD" is considering to make a new investment by purchasing a new machine for the production of a new product. For the new machine, "ABCD" must spend 6,000 euros, which will be sold after six years. Each year, the machine has 200 euros operating costs. The beneficial/useful life span of the machine is 6 years and its residual (salvage) value is zero. YEAR INCOME THE MACHINE GENERATES (in euros) 1 800 2 1,200 3 1,800 4 2,700 5...
The Springdale Corporation plans to purchase a demolition and wrecking machine to save labor costs. The...
The Springdale Corporation plans to purchase a demolition and wrecking machine to save labor costs. The machine costs $60,000 and has a salvage value of $10,000 at the end of 5 years. The machine is expected to be in operation for 5 years, and it will be depreciated by the straight line method up to the salvage value. The corporation specifies an after-tax MARR including inflation of 10% and has an income tax rate of 34%. The annual inflation rate...
Jubail Corporation purchased a vibratory finishing machine for $20,000 in year 0. The useful life of...
Jubail Corporation purchased a vibratory finishing machine for $20,000 in year 0. The useful life of the machine is 10 years, at the end of which, the machine is estimated to have a zero salvage value. The machine generates net annual revenues of $6,000. The annual operating and maintenance expenses are estimated to be $1,000. If Jubail's MARR is 12%, how many years does it take before this machine becomes profitable? A. 4 years < n ≤ 5 years B....
Covington Corporation purchased a vibratory finishing machine for ​$15,000 in year 0. The useful life of...
Covington Corporation purchased a vibratory finishing machine for ​$15,000 in year 0. The useful life of the machine is 10 years, at the end of which the machine is estimated to have a salvage value of zero. The machine generates net annual revenues of ​$6,500. The annual operating and maintenance expenses are estimated to be ​$800. If​ Covington's MARR is 10​%, how many years will it take before this machine becomes​ profitable? Assume that the cash flows occur continuously throughout...
A company invests $53,258 into a machine that has a useful life of 7 years and...
A company invests $53,258 into a machine that has a useful life of 7 years and a predicted salvage value of $46 The company's revenue using the machine is $952,243. It also has $1,456 operating costs and $34maintenance costs. What is the company's taxable income at the end of year 1, assuming straight line (SLN) depreciation.
Aurora Company is considering the purchase of a new machine. The invoice price of the machine...
Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $123,000, freight charges are estimated to be $4,000, and installation costs are expected to be $5,000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years. Existing equipment could be retained and used for an additional 5 years if the new machine is not purchased. At that time, the salvage value of the equipment would...
Carmel Corporation is considering the purchase of a machine costing $37,000 with a 5-year useful life...
Carmel Corporation is considering the purchase of a machine costing $37,000 with a 5-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? Multiple Choice $18,500. $22,200. $7,400. $37,000. $8,880. The following relates to a proposed equipment purchase: Cost $ 153,000 Salvage value $ 3,000 Estimated useful life 4 years...
A contractor is considering whether to buy or lease a new machine for her layout site...
A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $12,000 with a salvage value of $1200 after the machine's useful life of 8 years. On the other hand, leasing requires an annual lease payment of $3000. Assuming that the MARR is 15% and on the basis of an internal rate of return analysis, which alternative should the contractor be advised to accept? Part A: – Do...
Quip Corporation wants to purchase a new machine for $500,000. Management predicts that the machine will...
Quip Corporation wants to purchase a new machine for $500,000. Management predicts that the machine will produce sales of $210,000 each year for the next 6 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $35,000 and no gain on sale of the equipment at the end of it's life. Quip's combined income tax rate, t, is 35%....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT