Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem: You must estimate a proposal to purchase a new milling machine. The base price is dollar 108,000, and shipping and installation price would add another dollar 12,500. The machine falls into the MACRS three year class, and it would be sold after three years for dollar 65,000. The applicable depreciation rates are 33, 45, 15, and 7 percent as discussed in Appendix 12A. The machine would require a dollar 5,500 increase in working capital [increased inventory less increased accounts payable]. There would be no effect on revenues, but pre-tax labor costs would decline by dollar 44,000 per year. The marginal tax rate is 35%, and the WACC is 12%. Also, the firm spent dollar 5,000 last years investigating the feasibility of using the machine.

[A] How should the $5,000 spent last year be handled?

[B] find out the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?

[C] Determine the net operating cash flows during Years 1, 2, & 3?

[D] find out the terminal year cash flow?

[E] Should the machine be purchased? describe.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M918081

Have any Question? 


Related Questions in Basic Finance

1 suppose financial intermediaries did not exist and only

1. Suppose financial intermediaries did not exist and only direct finance was possible. How would this affect the process of an individual buying a car or a house? 2. During the 2007-2009 recession, many people who had t ...

Suppose that lilymac photography has annual sales of 222000

Suppose that LilyMac Photography has annual sales of $222,000, cost of goods sold of $157,000, average inventories of $6,300, average accounts receivable of $28,600, and an average accounts payable balance of $19,000. As ...

You have a stock and the measure of systematic risk for

You have a stock and the measure of systematic risk for this stock is 1.9. Assuming that risk free rate is 4% and market expected return is 9% what is the expected rate of return on your stock?

An article in the wall street journal discussing the fear

An article in the Wall Street Journal discussing the fear that some farmers had that regulation of derivatives would make it harder for them to hedge risk, described the situation of a feedlot owner who "uses derivatives ...

1 describe and illustrate an integrated service provider

1. Describe and illustrate an integrated service provider. How does the concept of integrated service provider differ from traditional service providers, such as forhire transportation and warehousing? 2. Compare and con ...

You have recently been hired by swan motors inc smi in its

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper battery with much greate ...

Choose a company that you would like to analyze and obtain

Choose a company that you would like to analyze and obtain its financial statements. Now, select another firm from the same industry and obtain its financial data from the Internet. Perform a complete ratio analysis on e ...

A piece of newly purchased industrial equipment costs

A piece of newly purchased industrial equipment costs $960,000 and is classified as seven-year property under MACRS. Calculate the annual depreciation allowances and the end-of-year book values for this.

1 from a tax perspective what primary requirements in a

1. From a tax perspective, what primary requirements in a lease transaction must be met in order for the IRS to consider the transaction a genuine lease? Why is a favorable IRS ruling regarding the tax status of a lease ...

Two astronauts with masses m1 and m2 say good-bye and push

Two astronauts with masses m1 and m2 say good-bye and push each other off in the space. The initial velocity of both was v0, and after the push-off the astronaut with the mass m1 moves with the velocity v1 in the same di ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen