Qs 12 and 13 - Please help with the following practice exam. Prof provided the answer key
Question:
Qs 12 and 13 - Please help with the following practice exam. Prof provided the answer key but REQUIRES showing the solution/analysis using Excel functions/formulas STEP-BY-STEP. Thank you.
Q12.
Answer Key:
NPV = $96,748.35
Question:
Stonie's Inc is looking at a new system with an installed cost of $385,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $60,000. The system will save the firm $135,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000.
- If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project?
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Q13.
Answer Key:
EAC = -$136,599.36 and -$129,998.21
Question:
You are evaluating two different silicon wafer milling machines. The Techron I costs $265,000, has a three-year life, and has pretax operating costs of $74,000 per year. The Techron II costs $445,000, has a five-year life, and has pretax operating costs of $47,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $35,000.
- If your tax rate is 22 percent and your discount rate and your discount rate is 10 percent, compute the EAC for both machines.
- Which do you prefer? Why?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill