Firm X is considering the replacement of an old machine with one that has a purchase priceof $70,000. The current market value of the old machine is $22,000 but the book value is $37,000. The firm's combined tax rate is 27%. What is the net cash outflow for the newmachine after considering the sale of the old machine? Disregard the effect of depreciationof the new machine if acquired.

Let's take a closer look at how the nett cash outflow for the new machine was determined. 1. Sale of…

Answered: Firm X is considering the replacement…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

b. Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.
Moda Produce is considering the purchase of a new machine to replace the existing asset. The current market value of the old fixed asset is $14,000, and $5,000 is its book value. The new equipment's cost as a fixed asset is $30,000. If the firm's marginal tax rate is 40%, what is the initial investment outlay for the acquisition of this new asset?
Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.
Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $432,605, would have a useful life of 7 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $77,500 per year. The internal rate of return on the investment in the tractor-trailer is closest to (Ignore income taxes.): Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
The Gamma Inc. is planning to spend P600,000 for a machine that will depreciate on a straight-line basis over a ten-year period with no terminal disposal price. The machine will generate cash flow from operations of P120,000 a year. Ignoring income taxes, what is the accounting rate of return on the net initial investment? (in percentage)
Old equipment with a book value of P15,000 will be replaced by new equipment with a purchase price of P50,000, exclusive of freight charges of P2,000. The market value of the old equipment is P11,000. Repair costs of P2,000 can be avoided if the new equipment is acquired. Assume a tax rate of 35%. What is the initial (net)investment of the project? Select one: a. P33,800 b. 52,000 c. P38,300 d. P39,700
Gumamela Company is considering replacing a machine with one that will save P50,000 per year in cash operating costs and has P20,000 more depreciation expense per year than the existing machine. The tax rate is 40%. Buying the new machine will increase annual net cash flows of the company by Select one: a. P20,000 b. P30,000 c. P12,000 d. P38,000 Old equipment with a book value of P15,000 will be replaced by new equipment with a purchase price of P50,000, exclusive of freight charges of P2,000. The market value of the old equipment is P11,000. Repair costs of P2,000 can be avoided if the new equipment is acquired. Assume a tax rate of 35%. What is the initial (net)investment of the project? Select one: a. P33,800 b. 52,000 c. P38,300 d. P39,700
The management of Nixon Corporation is investigating purchasing equipment that would cost $556.000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $383,000 per year and cash operating expenses by $220,500 per year. (Ignore income taxes.) Requlred: Determine the simple rate of return on the investment. (Round your answer to 1 declmal ploce.) Simple rate of retum Type here to search < Prev 4 of 4 近。 DELL E2 Eゴ ( F4 F5 F7 23 24 いゴ F12 3. V 4. 5. 7.
Newport Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $205,000. The equipment will have an initial cost of $950,000 and have a 6-year life. There is no salvage value for the equipment. If the hurdle rate is 7%, what is the approximate net present value? Ignore income taxes.
Boxton Corporation's required rate of return is 12%. The company is considering the purchase of a new machine that will save $20,000 per year in cash operating costs. The machine will cost $128,360 and will have a 10-year useful life with zero salvage value. Straight-line depreciation will be used. (Ignore income taxes.) Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. Required: Compute the machine's internal rate of return. Would you recommend purchase of the machine?
In the System, if you sell an asset that belongs to a particular class that faces a depreciation recapture penalty, which of the following could never happen simultaneously A Capital Gains Tax B Purchase Price< Salvage Value C Salvage Value >UCC D Loss on disposal Determine the discounted payback period of a project that requires an investment of $7, 500 today, an investment of $3, 500 next year, and then generates cash flows of $9,000 in every subsequent year. Assume a discount rate of 12.0% A 2.54 years B 1.46 years C 1.22 years D 1.54 years E 1.61 years
A project to replace an old machine with a new one is under consideration. The new machine costs $12.000 and requires an additional working capital investment of $750. The old machine is expected to have a $750 salvage value. Calculate the Initial Outlay of this replacement project assuming the book value of the old asset is $1500. The firm's marginal tax rate is 50%. O None of the listed choices is correct O $11.287.50 O $12.037.50 O $12.112.50 O $11,625.00

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS