Reference no: EM131360295
All quantitative work must be done in Excel; Word is not acceptable.
1. Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows ( labor saving and depreciation tax savings) of $19,000 per year. It would have zero salvage at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
2. Wendy's boss wants to use straight-line depreciation for the new expansion project because he said it will give higher net income in earlier years and give him a larger bonus. The project will last 4 years and requires $1,7000,00 of equipment. The company could either use straight line or 3-year MACRS accelerated method. Under straight-line depreciation, the cost of the equipment would depreciate evenly over its 4-year life. (Ignore the half-year convention for the straight-line method.) The applicable MARCS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41% as discussed in Appendix 11A. The project cost of capital is 10%, and its tax rate is 40%.
a. What would the depreciation expense be each year under each method?
b. Which depreciation method would produce the higher NPV, and how much higher would it be?
c. Why might Wendy's boss prefer straight-line depreciation?
3. The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $70,000, and it would cost another $15,000 to modify it for special use by your firm. The chromatograph, which falls into the MARCS 3-year class, would be sold after 3 years for $30,000. The MARCS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000. The machine would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%.
a. What is the Year-0 net cash flow?
b. What are the net operation cash flows in Years 1, 2, and 3?
c. What is the additional (nonoperating) cash flow is Year 3?
d. If the project's cost of capital is 10%, should the chromatograph be purchased?
Calculate the maximum bending stress
: Calculate the maximum bending stress and the maximum horizontal shear stress using the general shear formula.
|
Create a flyer that will serve the following function
: Create a flyer that will serve the following function:advertise the group to the clients in a creative way,appear client-friendly to gain the interest of potential clients,include information on the types of addiction the group will be addressing and..
|
Insurance company now for an annuity product
: How much would you pay an insurance company now for an annuity product that will pay you $450 a month for the next 10 years, and the current interest rate is 7 percent.
|
What economic theory states and predicts about issue present
: Discuss the model or economic theory that relates to the issue presented in the news article. Discuss what economic theory states and predicts about the issue presented in the news article.
|
Chen company milling machine
: Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards though, and so the company is considering replacing it. The new mi..
|
Determine allowable vertical shear force on cross section
: In the web, the shear stress is limited to 20 ksi. Use the general shear formula to determine the allowable vertical shear force on this cross section.
|
What is the equally likely decision
: Even though independent gasoline stations have been having a difficult time, What is the maximin decision? What is the equally likely decision? Develop a decision tree. Assume each outcome is equally likely, then find the highest EMV
|
What type of group would you create and why
: At the community mental health center several Borderline Personality Disordered (BPD) clients have been utilizing the crisis unit with increasing frequency. They have been doing self-mutilating activities but are not suicidal; instead using it to ..
|
What do you think should be our next step
: What do you think should be our next step?" While Madeline thinks, what advice would you offer - However, the people that we serve will benefit. The increase in customer satisfaction and goodwill should more than offset the extra cost. The federal..
|