What is the tax effect of selling the old machine

Assignment Help Finance Basics
Reference no: EM13300678

This is a sample question so I have the answer but I need to know the method of getting to the answer. I am not getting to the correct number. Please give detailed very simplified explanation using a financial calculator, calculator or Excel spreadsheet so that I understand how to do this please.

Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $30,000 when purchased 5 years ago and is being depreciated using the simplified straight line method over a useful life of 10 years. The old van could be sold for $5,000 today. The new van has an invoice price of $75,000 and will cost an additional $5,000 to modify it to carry the company's products. Cost savings from the use of the new van are expected to be $22,000 per year for 5 years at which time the van will be sold for its estimated salvage value of $15,000. The new van will be depreciated using the simplified straight line method over its 5 year useful life. The company's tax rate is 35%/ Working capital is expected to increase by $3,000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the tax effect of selling the old machine?

 

Reference no: EM13300678

Questions Cloud

Explain one frequently observes the formation of a blck : In heating an organic compound strongly with metallic sodium, one frequently observes the formation of a blck material, which is insoluble in water
What type of aquifer material do expect in the location : A dye test reveals that the specific discharge between the two wells is about 2.75 m/day. if the wells are 45m apart, What type of aquifer material do you expect in this location
How many times does the diaphragm move back and forth : A loud speaker diaphragm is producing a sound for 2.5s by moving back and forth in simple harmonic motion. How many times does the diaphragm move back and forth
What was the value per bond of the conversion feature : Calculate the premium on the bonds-that is, the percentage excess of the conversion price over the stock price at the time of the issue.
What is the tax effect of selling the old machine : The company's tax rate is 35% Working capital is expected to increase by $3,000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the tax effect of selling the old machine?
What is the maximum distance away that the navigation lights : What is the maximum distance away that the navigation lights can still be seen by an observer standing at the shoreline The observer's eye height is 5'6" and the uppermost navigation light is 168 above the water.
Calculate the new period of oscillation : The pendulum is now swinging on Pluto. Calculate the new period of oscillation in terms of T, knowing that on Pluto the gravity is 1/16 of gravity on the Earth
Explain what is the ph of a buffer that results nahco2 : What is the pH of a buffer that results when 0.40 mol NaHCO2 is mixed with 100.0 mL of 2.00 M HCl and diluted with water to 250 mL (Ka of HCO2H=1.8*10^-4.
Define a mixture of compound x and its enantiomer : A mixture of Compound X and its enantiomer are placed in the polarimeter and the observed rotation is -5.1 degrees. Which enantiomer is in excess (+ or -)? Calculate the enantiometric

Reviews

Write a Review

Finance Basics Questions & Answers

  Computation of weighted average cost of capital

Computation of weighted average cost of capital and What is Jake's weighted average cost of capital

  Optimal capital structure

The financial manager has estimated the following schedules for the cost of funds: Determine the company optimal capital structure.

  What is the new degree of operating leverage

what will be the increase in operating cash flow? What is the new degree of operating leverage?

  Compute the implied expected inflation rate

Suppose that a three year Treasury note has no maturity premium, and that the real, risk-free rate of interest is 3%. If the T-note carries a yield to maturity of 13%,

  What is the amount a person would have to deposit today

What is the amount a person would have to deposit today to be able to take out $5000 a year for 10 years from an account earning 8 percent annually?

  Finance example - break even analysis

Assume EducateComp knows its fixed expenses are $100,000, its variable costs are  $500 each copy of AlgeComp, and they must to sell 15000 copies of AlgeComp to  break even the first year.

  What inflation rate is expected after year 1

However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3%. Assume that expectations theory holds and the real risk-free rate is r* = 2.5%.

  What is the expected return for the overall stock market

What is the expected return for the overall stock market? Round your answer to two decimal places.

  Calculate hassan madhatter total assets

Last year, Hassan's Madhatter, Inc., had an ROA of 7 percent, a profit margin of 12.95 percent, and sales of $20 million. Calculate Hassan's Madhatter's total assets.

  A description of the new cmo tranche

A description of the new CMO tranche and how it may or may not be a better choice for the client than the corporate bond and the MBS thatyour boss initially recommended

  Evaluation of foreign currency

Computation of Foreign Currency - Hedging with forward contracts and find the variance of the dollar price of this asset if the U.S. firm remains unhedged against this exposure?

  What is the discount rate future bookstore

The retail price when the book is published will be $21. What is the discount rate Future Bookstore is offering its customers for this book?

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