Should the company buy and install the machine press

Assignment Help Corporate Finance
Reference no: EM13196667

Benang Industrial Tools is considering a 3-year project to improve its production efficiency. Buying a new machine press for RM611,000 is estimated to result in RM193,000 in annual pretax cost savings. The press falls in the MACRS five-year class (table 1), and it will have a salvage value at the end of the project of RM162,000. The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?                   

948_Modified ACRS depreciation allowances.png

Table 1: Modified ACRS depreciation allowances

Reference no: EM13196667

Questions Cloud

What should the bonds sell for in the market today : What should be the price of the security you are considering purchasing? Calculate and justify your answer and what should the bonds sell for in the market today
How many shoppers like cheerios or total : out of 500 randomly chosen grocery shoppers, 320 like cheerios and 380 like total. 275 of the grocery shoppers liked both cheerios and total.
Compute a for a process in which an ideal gas expands : Calculate A for a process in which 0.160 mole of an ideal gas expands from 1.0 L to 3.5 L against a constant pressure
State the null and the alternative hypotheses : The manager of a grocery store wants to determine whether the amount of milk contained in 2-litre cans actually averages 2 litres as advertised. State the null and the alternative hypotheses. Which kind of test you will use to prove it?
Should the company buy and install the machine press : The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should th..
Explain energy is in the form of electromagnetic radiation : this energy is in the form ofelectromagnetic radiation, what is the frequency of the radiation? Is the radiation emitted orabsorbed?
The ae function and equilibrium national income : Canadian minister of defence announces $9million purchase of 65 new fighter jets. Assuming that aggregate out put is demand determined and that the .f-35 jets are purchased domestically.
Find the present value of an income stream : How much would the government have to set aside now (when a child is born), to supplement the average parent's share of a child's college health care cost?  The lump sum the government sets aside will also be invested at 6%, annual compounding.
Explain phosphorus and molecular hydrogen : The thermal decomposition of phosphine (PH3) into phosphorus and molecular hydrogen is a 1st order reaction 4PH3(g)--- P4(g)+6 H2(g) The half life of the reaction is 35.0 s at 680C calculate a)

Reviews

Write a Review

Corporate Finance Questions & Answers

  Explain markets expectations about future of economy

Finish the given assignment by entering the data in a M.S. excel spreadsheet & using graphing capabilities in Excel to create the yield curve.

  Why do firms compute weighted-average costs of capital

Why do firms compute weighted-average costs of capital?    You need to estimate the value of a company with the following data:

  Describe the pattern and the type of risk that may apply

A company has a bond issue outstanding that pays $150 annual interest plus $1000 at maturity. The bond has a maturity of 10 years. Compute the value of the bond when the interest rate is 5%, 9%, and 13%. Describe the pattern and the type of risk t..

  Estimate earnings per share for plan

Assume GESS has no internal sources of financing and does not pay dividends. Under these conditions, would the pecking order hypothesis influence the decision to use Plan A or Plan B?

  What is the required rate of return

What is the required rate of return on an investment with a beta of 1.5? If such an investment offers an expected return of 10%, does it have a positive NPV?

  Find the effective annual rate

Bank A provides loans with a 10 percent stated yearly rate and a 10 percent compensating balance. You wish to obtain $250,000 in a 6 month loan.

  Evaluating the firms credit worthiness - usefulness of firm

Determine how this information can be used to shed light on the usefulness of firm variables on evaluating the firm's credit worthiness.

  Compare and contrast the multiplier effects

The recently passed 'American Recovery and Reinvestment Act' contains a mix of tax rebates, tax credits and increases in various transfer payments

  Budgeting perspectives from the real world

Budgeting is an important section of an management planning. Using budgeting, every part of an management structure can be identified for decision making & controls.

  Determine the annual premium

The manager of a life insurance firm is trying to decide yearly premium to charge a group of policyholders, each of whom has just received his birthday. Assume the firm has operating expenses on sales is $500,000.

  Determine the beginning value of the bond

A fifteen year bond issued today by Carris, corporation has a coupon rate of 11 percent, a required return of 7 percent and a face value of $1000. The bond will be sold in next six years.

  Production transactions

Controls pertaining to recording inventory transactions are important to assessing control risk for existence and occurrence, completeness, valuation or allocation

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd