Walter White's lawn statue fabrication machine has a life expectancy of 45,000 units. The machine cost $1,000,000 and has a salvage value of $100,000 at the end of its useful life. Production in the machine's first 10 years (in statues per year) was as follow: 1775, 1812, 1861, 1898, 1917, 1941, 1950, 1964, 2001, and 2003. The book value of the fabrication machine after 10 years is closest to $ 637,700 655,800 617,600 O 595,100
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- The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent. d. What is the NPV of this project? e.…The Darlington Equipment Company purchased a machine5 years ago at a cost of $85,000. The machine had an expected life of 10 years at thetime of purchase, and it is being depreciated by the straight-line method by $8,500per year. If the machine is not replaced, it can be sold for $15,000 at the end of itsuseful life.A new machine can be purchased for $170,000, including installation costs. Duringits 5-year life, it will reduce cash operating expenses by $40,000 per year. Sales are notexpected to change. At the end of its useful life, the machine is estimated to be worthless.MACRS depreciation will be used, and the machine will be depreciated over its 3-year classlife rather than its 5-year economic life, so the applicable depreciation rates are 33%, 45%,15%, and 7%.The old machine can be sold today for $55,000. The firm’s tax rate is 40%. The appropriateWACC is 9%.a. If the new machine is purchased, what is the amount of the initial cash flow atYear 0?b. What are the incremental cash…The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent. a. If the new machine is purchased, what is…
- The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,500 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $170,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the nearest dollar.$…A machine was purchased 5 years ago for $12,000. At that time, its estimated life was 10 years with an estimated end-of-life salvage value of$1,200. The average annual operating and maintenance costs have been$14,000 and are expected to continue at this rate for the next 5 years.How ever, average annual revenues have been and are expected to be $20,000. Now, the firm can trade in the old machine for a new machine for $5,000. The new machine has a list price of $15,000, an estimated life of 10 years, annual operating and maintenance costs of $7,500, annual revenues of $13,000, and salvage values at the end of the jth year according to Sj = $15, 000 − $1, 500j, for j = 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Determine whether to replace or not by the annual worth method using a MARR equal to 15% compounded annually. Use a 5-year planning horizon and the cash flow approach.A highway construction firm purchased a particular earthmoving machine 3 years ago for $125,000. The salvage value at the end of 8 years was estimated to be 35% of first cost. The firm earns an average annual gross revenue of $105,000 with the machine and the average annual operatingcosts have been and are expected to be $65,000. The firm now has the opportunity to sell the machine for $70,000 and subcontract the work normally done by the machine over the next 5 years. If the subcontracting is done, the average annual gross revenue will remain $105,000 but the subcontractor charges $85,000/end-of-year for these services. If a 15% rate of return before taxes is desired, use a cash flow approach to determine by the annual worth method whether or not the firm should subcontract.
- A die-cutting machine was purchased three years ago for $450,000. The useful life of the equipment is Estimated at eight years with a zero salvage value. The annual income earned with equipment is $190,000, operating and labor costs are $110,000 per unit. year. A new machine with increased production capacity can be purchased that would increase revenue to $250,000 per year, with operating and labor costs of $130,000. The cost of the new machine is $600,000 with a salvage value of zero and a useful life of five years. The used machine can now be sold for $300,000. The equipment is depreciated on a straight-line basis, taxes are paid at 45%, and the company's MARR is 10%. Determine the economic desirability of the replacement.Forwind Ltd has recently acquired a machine that cost $29 000. The machine normally remains productive for six years. It is expected to continue in the production process at Forwind for eight years due to the excellent maintenance and operating policies in place at Forwind. The machine has the capacity to produce 20 000 units over a six-year life and 27 000 units over an eight-year life. Its salvage value after six years is expected to be $2 500 and after eight years $1 000. What depreciation would be charged in the first year of the machine's operation when 4 000 units were produced (rounded to the nearest dollar)? Select one alternative: $5 600 $4 296 $5 300 $4 148Machine A was purchased 5 years ago for $90,000. Its operating cost is higher than expected, so it will be used for only 4 more years. Its operating cost this year will be $40,000, increasing by $2000 per year through the end of its useful life. The challenger, machine B, will cost $150,000 with a $50,000 salvage value after its 10-year ESL. Its operating cost is expected to be $10,000 for year 1, increasing by $500 per year thereafter. What is the market value for machine A that would make the two machines equally attractive at an interest rate of 12% per year. Solve by hand and spreadsheet. (Hint: Be sure you check the RV value carefully.)
- Joe Production purchased a new computerized machine at a cost of $450,000. The machine has a residual value of $64,000 and an expected lifeof 5 years. The actual machine hours were a total of 154,400 over the 5 years. Each year the hours were: 55,000 in year 1, 50,000 in year 2, 30,000 inyear 3, 13,000 in year 4, and 6,400 in year 5. Calculate the depreciation cost per machine hour. Calculate the depreciation expense, accumulated depreciation and book value for all 5 years of the machine's expectedlife using the units of production method of depreciation.XYZ Manufacturing Corporation currently has production equipment that has 4 years ofremaining life. The equipment was purchased a year ago at a cost of $10,000. The annual depreciation for this machine is $1,800 and its expected salvage value is $1,000. The equipment can be sold today for $8,000. The company has been considering the purchase of a new machine that will replace the existing one. The new equipment costs $15,000 and would increase sales (through increased production) by $2,000 per year and decrease operating costs by $1,000 per year. The equipment will be worthless after 4 years. The applicable depreciation rates are 0.33, 0.45, 0.15, and 0.07. The company's tax rate is 40 percent and its cost of capital is 12 percent. What is the Net Investment (NINV)Two years ago, a FN325 Lathe machine was purchased with an estimated salvage value of RM2,000 at the conclusion of its seven-year life. The annual operating expenditures are RM2,000. Another company's salesperson is selling a replacement NC345 Lathe machine for RM14,000 with a salvage value of RM1,400 after five years. The annual operating costs for the FN345 Lathe machine will be only RM1,400. For the FN325 Lathe machine, a RM10,400 trade-in allowance has been offered. Should you replace the FN325 Lathe machine if the annual interest rate is 12% before taxes?