Reference no: EM133057083

1) Daily Enterprises is purchasing a $9.7 million machine. It will cost $50,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. If Daily uses? straight-line depreciation, what are the depreciation expenses associated with this? machine?

2) Daily Enterprises is purchasing a $10.0 million machine. It will cost $50,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of $4.0 million per year along with incremental costs of $1.2 million per year. If? Daily's marginal tax rate is 35%?, what are the incremental earnings? (net income) associated with the new? machine?

3) Pisa? Pizza, a seller of frozen? pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $22 million per year. While many of these sales will be to new? customers, Pisa Pizza estimates that 49% will come from customers who switch to the? new, healthier pizza instead of buying the original version.

a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new? pizza?

b. Suppose that 45% of the customers who will switch from Pisa? Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this? case?

4) One year? ago, your company purchased a machine used in manufacturing for $115,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $170,000 today. It will be depreciated on a? straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin? (revenues minus operating expenses other than? depreciation) of $50,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $21,000 per year. The current machine is being depreciated on a? straight-line basis over a useful life of 11? years, and has no salvage? value, so depreciation expense for the current machine is $10,455 per year. The market value today of the current machine is $45,000. Your? company's tax rate is 35%?, and the opportunity cost of capital for this type of equipment is 12%. Should your company replace its? year-old machine?