Refer to the homework –choice between Current rent a machine/Purchase a machine/Purchase a new machine Tea company rent a bottling machine for 50,000 per year, Including all the maintaining cost. It Is considering to purchase a machine instead. A. Purchase the machine it is currently costing for 150,000. The machine will require 21,000 per year for maintain. B. Purchase a new more advanced machine for 260,000. The machine will require 15,000 per year for ongoing maintain. And will save the bottling cost of 11000 per year.
Also 40,000 will be spend upfront training the new operator of the new machine. Suppose the appropriate discount rate is 9% per year and the machine Is purchase today. Malevolence and bottling cost will be paid on end of the year. The machine will depreciation Vela the straight line depreciation over seven years and they have 10 year machine life with The NP of rent the machine The Novo option a is ? The NP of option b is ? Which Is the best choice? 2) GM product 500,000 electronic motto a year and expect output level remain stable in the future.
The company buy it with a cost of 2. 5 each. The plant MGM believes it is cheaper to make it instead of buy it. Production will cost 1. 8 The necessary machine will cost 700,000 and will be obsolete in 10 years. The investment would be depreciation to tax of 10 year straight line depreciation. The plant manager estimates that the operation would require additional capital expenditure of 40,000 in year. The expected proceeds from scrapping the machine after 10 years are estimated to be 10,000. The AIR for GM of manufacture the part in house is close to Tax 35%/ 10%.
Choice: Correct answer 50% 3). RUB Is considering aqualung POP Inc a smaller unsuccessful Internet firm POP has pre-tax income of 100 million per year, a cost of capital of 10% and pay 35% in taxes. If RUB acquires POP, then the NP of POP tax loss carry forward to RUB is change to Choice: 92/ 262 / 320/236 4). Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plan to using a cost of capital of 12% to evaluate the project. Base the evaluation research, It has prepared the following Incremental cash low projects.
Year 2 3 Sales (revenues) 1 o,oho – COGS (50% of sales) 50,000 – Depreciation 30,000 -BIT 20,000 -Taxes (35%) 7,000 -?unleavened net income 13,000 *Depreciation Choice: 45000 or 25000 or 43000 or 38000 Answer: Year 5, the company has considered to investing in a new case manufacture machine that has a estimate life of three years. The cost of the machine is 10,000 and the machine will be straight depreciation over three year’s life with zero residual value. The case manufacturing machine will trigger in sales of 2000 case in year 1 .
Sales are estimated to grow 10% per year through three year. The price per case will charge to customer is 18 each and remain in constant. The case has a cost per unit in manufacture of 9 each. Installing the machine will require a increase in the net working capital account.?? It is estimated that the company need to hold the 2% of the total sales in cash, 4%?? In account receivable, 9% in inventory, and 6% in account payable. The firm is in the 35% of market? And has a cost of capital of 10%. The amount of the incremental income taxes that the company will pay in the first year of
