Question

22. Drake Industries is purchasing a new chemical vapor depositor in order to make silicon chips....

22. Drake Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $7,000,000 to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4,000,000 per year over its working life, starting at the end of the first year. Additional selling, general, and administrative (SG&A) expenses of  $1 million will also be required for each of those years. The machine is expected to have a working life of seven years and will be depreciated on a straight-line basis over those seven years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

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
Cameron Industries is purchasing a new chemical vapour depositor in order to make silicon chips. It...
Cameron Industries is purchasing a new chemical vapour depositor in order to make silicon chips. It will cost $6 million to buy the machine and $10 000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4 million per year, starting at the end of the first year, with associated costs of $1 million for each of those...
Billingham Packaging is considering expanding its production capacity by purchasing a new​ machine, the​ XC-750. The...
Billingham Packaging is considering expanding its production capacity by purchasing a new​ machine, the​ XC-750. The cost of the​ XC-750 is $ 2.75 million.​ Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $ 50 comma 000 feasibility study to analyze the decision to buy the​ XC-750, resulting in the following​ estimates: bullet ​Marketing: Once the​ XC-750 is operating next​ year, the extra capacity is expected to generate $ 10...
A firm is considering replacing a machine that has been used to make a certain kind...
A firm is considering replacing a machine that has been used to make a certain kind of packaging material. The new, improved machine will cost $32,000 installed and will have an estimated economic life of 10 years, with a salvage value of $2,500. Operating costs are expected to be $1,000 per year throughout the service life of the machine. The old machine (still in use) had an original cost of $25,000 four years ago, and at the time it was...
16. Notational Inc. is considering installing a new server. The machine costs $100,000 and is expected...
16. Notational Inc. is considering installing a new server. The machine costs $100,000 and is expected to have a useful economic life of 8 years, after which it will have a book value of $0. In addition to the equipment costs, management expects installation costs of $10,000 and an initial outlay for net working capital of $12,000. The new server is expected to generate an additional $10,000 per year in earnings after tax over its useful life, but an additional...
Billingham Packaging is considering expanding its production capacity by purchasing a new? machine, the? XC-750. The...
Billingham Packaging is considering expanding its production capacity by purchasing a new? machine, the? XC-750. The cost of the? XC-750 is $2.75 million.? Unfortunately, installing this machine will take several months and will partially disrupt production. The firm has just completed a $49,000 feasibility study to analyze the decision to buy the? XC-750, resulting in the following? estimates: • ?Marketing: Once the? XC-750 is operational next? year, the extra capacity is expected to generate $10.20 million per year in additional?...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process special orders. The following financial information is available. - Without the project, the company expects to have a taxable income of $441,000 each year from its regular business over the next three years. - With the three-year project, the purchase of a new set of machine tools at a cost of $54,000 is required. The equipment falls into the MACRS three-year class. The tools...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process special orders. The following financial information is available. - Without the project, the company expects to have a taxable income of $432,000 each year from its regular business over the next three years. - With the three-year project, the purchase of a new set of machine tools at a cost of $41,000 is required. The equipment falls into the MACRS three-year class. The tools...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process special orders. The following financial information is available. - Without the project, the company expects to have a taxable income of $368,000 each year from its regular business over the next three years. - With the three-year project, the purchase of a new set of machine tools at a cost of $52,000 is required. The equipment falls into the MACRS three-year class. The tools...
A company is evaluating the purchase of a machine to improve product quality and output levels....
A company is evaluating the purchase of a machine to improve product quality and output levels. The new machine would cost $1.4 million and would be depreciated for tax purposes using the straight-line method over an estimated seven-year life to its expected salvage value of $100,000. The new machine would require an addition of $90,000 to working capital at the beginning of the project, which will of course be returned to the firm at the end of the project. In...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process...
"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process special orders. The following financial information is available. - Without the project, the company expects to have a taxable income of $423,000 each year from its regular business over the next three years. - With the three-year project, the purchase of a new set of machine tools at a cost of $54,000 is required. The equipment falls into the MACRS three-year class. The tools...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT