Question

Gamma Electronics is considering the purchase of testing equipment that will cost $300,000 to replace old...

Gamma Electronics is considering the purchase of testing equipment that will cost $300,000 to replace old equipment. Assume the new machine will generate after-tax savings of $100,000 per year over the next four years. If the firm has a 15% cost of capital, what's the discount payback period of the investment?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Please refer to the image below for the solution

Let me know in the comment section in case of any doubt.

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
Bethlehem Company plans to replace an old piece of equipment that has no book value for...
Bethlehem Company plans to replace an old piece of equipment that has no book value for tax purposes and no salvage value. The replacement equipment will provide annual cash savings of $8,000 before income taxes. The equipment costs $20,000 and will have no salvage value at the end of its five-year life. Bethlehem uses straight line depreciation method for both book and tax purposes. The company incurs a 40% marginal tax rate, and its after-tax cost of capital is 14%....
Bethlehem Company plans to replace an old piece of equipment that has no book value for...
Bethlehem Company plans to replace an old piece of equipment that has no book value for tax purposes and no salvage value. The replacement equipment will provide annual cash savings of $8,000 before income taxes. The equipment costs $20,000 and will have no salvage value at the end of its five-year life. Bethlehem uses straight-line depreciation method for both book and tax purposes. The company incurs a 40% marginal tax rate, and its after-tax cost of capital is 14%. Required:...
The ABD company is considering the purchase of a new machine to replace an out of...
The ABD company is considering the purchase of a new machine to replace an out of date machine that has a book value of $18000 and can be sold today for $2,000. The old machine is being depreciated on a straightline basis over 4 more years to a book value of $2000 at the end of the fourth year. The old machine generates annual revenues of $105000 and annual expenses of $75000. This machine requires a fixed investment of $5000...
A firm is considering an investment in a new machine with a price of $15.6 million...
A firm is considering an investment in a new machine with a price of $15.6 million to replace its existing machine. The current machine has a book value of $5.4 million and a market value of $4.1 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.3 million in...
Aurora Playground Equipment Inc is considering the purchase of a new machine. The firm requires 14.00%...
Aurora Playground Equipment Inc is considering the purchase of a new machine. The firm requires 14.00% return on the investment and payback within 3 years. The machine is expected to provide cash flows as follows: $11000 $5,500 $6,000 $1,000 $1,000 Year 0 1 2 3 4 Determine the Pay pack Period for the Machine and whether it should be acceptable for investment. Payback Period?______ Determine the Internal Rate of Return (IRR) of the Machine_______?
A firm is considering an investment in a new machine with a price of $18.05 million...
A firm is considering an investment in a new machine with a price of $18.05 million to replace its existing machine. The current machine has a book value of $6.05 million and a market value of $4.55 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.75 million in...
A firm is considering an investment in a new machine with a price of $15.6 million...
A firm is considering an investment in a new machine with a price of $15.6 million to replace its existing machine. The new machine is expected to have a four-year life. If the firm replaces the old machine with the new machine, it expects to save $6.3 million in operating costs each year over the next four years. The new machine will have no salvage value in four years. If the firm purchases the new machine, it will also need...
FITCO is considering the purchase of new equipment. The equipment costs $325000, and an additional $100000...
FITCO is considering the purchase of new equipment. The equipment costs $325000, and an additional $100000 is needed to install it. The equipment will be depreciated straight-line to zero over a 5-year life. The equipment will generate additional annual revenues of $260000, and it will have annual cash operating expenses of $80000. The equipment will be sold for $80000 after 5 years. An inventory investment of $70000 is required during the life of the investment. FITCO is in the 40...
Q) Your corporation is considering replacing older equipment.  The old machine is fully depreciated and cost  $53,633.00  seven years...
Q) Your corporation is considering replacing older equipment.  The old machine is fully depreciated and cost  $53,633.00  seven years ago.  The old equipment currently has no market value. The new equipment cost $55,937.00 .  The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $14,087.00 .  The new equipment is expected to save the firm $15,718.00  annually by increasing efficiency and cost savings.  The...
A firm is considering an investment into a new machine with a price of $18 million...
A firm is considering an investment into a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5 million. The new machine is expected to have a four-year life, and also the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.5 million...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT