Question

Joe's Wilderness Outfitters is considering replacing their point of sale system. The current system was purchased 10 years ago at a total cost of $70,000. It is being depreciated straight-line to a zero value over 20 years. If Joe sells the point of sale system for $34,000 what is the after-tax cash flow to Joe's Wilderness Outfitters? Use 30% for the effective tax rate.

$34,300

$33,700

$35,000

$34,800

Answer #1

**Answer: The correct answer is $34,300**

Annual Depreciation = (Initial Cost – Residual Value) / Useful
Life

Annual Depreciation = ($70,000 - $0) / 20

Annual Depreciation = $3,500

Accumulated Depreciation = $3,500 * 10

Accumulated Depreciation = $35,000

Book Value = Initial Cost – Accumulated Depreciation

Book Value = $70,000 - $35,000

Book Value = $35,000

After Tax Salvage Value = Salvage Value – Tax rate * (Salvage
Value – Book Value)

After Tax Salvage Value = $34,000 – 0.30 * ($34,000 -
$35,000)

After Tax Salvage Value = $34,000 + 0.30 * $1,000

After Tax Salvage Value = $34,000 + $300

After Tax Salvage Value = $34,300

c) Bank ABC Berhad is considering replacing its existing
computer system, which was purchased 2 years ago at a cost of
RM325, 000. The system can be sold today for RM200, 000. It is
being depreciated and 5-year recovery period. A new computer system
will cost RM500, 000 to purchase and install. Replacement of the
computer system would not involve any change in net working
capital. Assume a 40% tax rate. Calculate the following;
The book value of the existing...

Texas Tires is considering replacing an old machine with a new,
more efficient, one. The new machine will cost $1.2
million. The old machine originally cost $714,000 4
years ago and was being depreciated straight line over a 7 year
life. The old machine can now be sold for $325,000. The
firm has a 30 % tax rate. Calculate the initial
outlay on the new machine.

Woodland Corporation purchased a printing machine three (3)
years ago and is considering replacing it with a new one which is
faster and easier to operate. The old machine has been depreciated
over 3 years using straight line depreciation. Its original
installation cost was $15,000.
The old machine has been in use for 2 years, and it can be
traded in for $3,500.
The new machine will be purchased $24,000 and it will also be
depreciated over 3 years using...

Woodland Corporation purchased a printing machine three (3)
years ago and is considering replacing it with a new one which is
faster and easier to operate. The old machine has been
depreciated over 3 years using straight line depreciation. Its
original installation cost was $15,000. The old machine
has been in use for 2 years, and it can be traded in for
$3,500. The new machine will be purchased $24,000
and it will also be depreciated over 3 years using the straight...

Calculating initial investment Vastine Medical, Inc., is
considering replacing its existing computer system, which was
purchased 3 years ago at a cost of $322,000. The system can be sold
today for $204,000. It is being depreciated using MACRS and a
5-year recovery period (see the table. A new computer system will
cost $501,000 to purchase and install. Replacement of the computer
system would not involve any change in net working capital. Assume
a 40% tax rate on ordinary income and...

3. Woodland Corporation purchased a printing machine three (3)
years ago and is considering replacing it with a new one which is
faster and easier to operate. The old machine has been depreciated
over 3 years using straight line depreciation. Its original
installation cost was $15,000. The old machine has been in use for
2 years, and it can be traded in for $3,500.
The new machine will be purchased $24,000 and it will also be
depreciated over 3 years...

ABC company is considering replacing their old manual loading
machine with an automatic loading machine. The manual machine cost
$300000 three years ago, and is being depreciated over 10 years
straight line depreciation, with no salvage value. If ABC replaces
the manual machine, the new automatic machine will cost $4000000
and have a useful life of 10 years. This will also be depreciated
on a straight line basis to zero. As a result of this new machine,
there will be...

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...

Oxygen Optimization is considering buying a new purification
system. The new system would be purchased today for 18,400 dollars.
It would be depreciated straight-line to 1,800 dollars over 2
years. In 2 years, the system would be sold and the after-tax cash
flow from capital spending in year 2 would be 3,100 dollars. The
system is expected to reduce costs by 5,400 dollars in year 1 and
by 14,000 dollars in year 2. If the tax rate is 50 percent...

Oxygen Optimization is considering buying a new purification
system. The new system would be purchased today for 17,200 dollars.
It would be depreciated straight-line to 2,200 dollars over 2
years. In 2 years, the system would be sold and the after-tax cash
flow from capital spending in year 2 would be 3,500 dollars. The
system is expected to reduce costs by 6,100 dollars in year 1 and
by 12,400 dollars in year 2. If the tax rate is 50 percent...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 44 minutes ago

asked 1 hour ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago

asked 5 hours ago

asked 5 hours ago