Question

The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $240,000. Of this amount, $190,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $50,000. The depreciated assets will have zero resale value. Use Table 12-12.

The contract will require an additional investment of $54,000 in
working capital at the beginning of the first year and, of this
amount, $34,000 will be returned to the Spartan Technology Company
after six years.

The investment will produce $75,000 in income before depreciation
and taxes for each of the six years. The corporation is in a 25
percent tax bracket and has a 8 percent cost of capital.

**A.)** Calculate the net present value

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Oregon Forest Products will acquire new equipment that falls
under the five-year MACRS category. The cost is $340,000. If the
equipment is purchased, the following earnings before depreciation
and taxes will be generated for the next six years. Use Table
12-12.

Earnings before Depreciation | |||||

Year 1 | $ | 121,000 | |||

Year 2 | 140,000 | ||||

Year 3 | 100,000 | ||||

Year 4 | 60,000 | ||||

Year 5 | 55,000 | ||||

Year 6 | 32,000 | ||||

The firm is in a 25 percent tax bracket and has a 12 percent cost
of capital.

**A.)** calculate the net present value

Answer #1

1)

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $185,000. Of this amount, $160,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the nondepreciable assets will be sold for $25,000. The depreciated
assets will have zero resale value. Use Table 12-12. Use Appendix B
for an approximate answer but calculate...

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $320,000. Of this amount, $260,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the nondepreciable assets will be sold for $60,000. The depreciated
assets will have zero resale value. Use Table 12-12. Use Appendix B
for an approximate answer but calculate...

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $160,000. Of this amount, $145,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the nondepreciable assets will be sold for $15,000. The depreciated
assets will have zero resale value. Use Table 12-12. Use Appendix B
for an approximate answer but calculate...

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $240,000. Of this amount, $190,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the nondepreciable assets will be sold for $50,000. The depreciated
assets will have zero resale value. Use Table 12-12.
The contract will require an additional investment of $54,000...

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $160,000. Of this amount, $135,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the nondepreciable assets will be sold for $25,000. The depreciated
assets will have zero resale value. Use Table 12-12. Use Appendix B
for an approximate answer but calculate...

The Spartan Technology Company has a proposed contract with the
Digital Systems Company of Michigan. The initial investment in land
and equipment will be $305,000. Of this amount, $290,000 is subject
to five-year MACRS depreciation. The balance is in nondepreciable
property. The contract covers six years; at the end of six years,
the non depreciable assets will be sold for $15,000. The
depreciated assets will have zero resale value. Use Table
12-12.
The contract will require an additional investment of...

Oregon Forest Products will acquire new equipment that falls
under the five-year MACRS category. The cost is $500,000. If the
equipment is purchased, the following earnings before depreciation
and taxes will be generated for the next six years. Use Table
12-12. Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
Earnings before Depreciation
Year 1
$
160,000
Year 2
215,000
Year 3
125,000
Year 4
89,000
Year 5
78,000
Year...

Oregon Forest Products will acquire new equipment that falls
under the five-year MACRS category. The cost is $460,000. If the
equipment is purchased, the following earnings before depreciation
and taxes will be generated for the next six years. Use Table
12-12. Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
Earnings before Depreciation
Year 1
$
149,000
Year 2
200,000
Year 3
130,000
Year 4
83,000
Year 5
75,000
Year...

Oregon Forest Products will acquire new equipment that falls
under the five-year MACRS category. The cost is $440,000. If the
equipment is purchased, the following earnings before depreciation
and taxes will be generated for the next six years. Use Table
12-12.
Earnings before Depreciation
Year 1
$
125,000
Year 2
175,000
Year 3
120,000
Year 4
80,000
Year 5
71,000
Year 6
41,000
The firm is in a 25 percent tax bracket and has a 12 percent cost
of capital....

Oregon Forest Products will acquire new equipment that falls
under the five-year MACRS category. The cost is $440,000. If the
equipment is purchased, the following earnings before depreciation
and taxes will be generated for the next six years. Use Table
12-12. Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator methods.
Earnings before Depreciation Year 1 $ 120,000 Year 2 190,000 Year 3
130,000 Year 4 71,000 Year 5 70,000 Year...

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