Question: A machine that costs $12,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The

A machine that costs $12,000 is expected to operate for 10 years. The estimated at the end of 10 years is $0. The machine is expected to save the company $2,331 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 40 percent. The firm’s is 14 percent. Based on the criterion, should this machine be purchased?

Step by Step Solution

★★★★★

3.19 Rating (155 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

NINV 12000 Depreciationyears 1200010 1200 NCF 0 2331 12001 4 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

208-B-E-M-E (708).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

A machine that costs $8,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $1,554 per year before taxes and...

The company has a marginal tax rate if 40 percent. a study of publicly held companies in this line of business suggests that the required return on equity is about 17 percent. The company's debt is...

A firm is considering purchasing a machine that costs $65,000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $35,000 per year in...

1) A new machine tool costs $500,000, and has a useful life of 10 years. Its estimated salvage value at the end of year 10 is $50,000. (a) Determine the depreciation for years 1-10 using the...

1) A new machine costs $35,000, and has a useful life of 10 years. Its estimated salvage value at the end of year 10 is $15,000. (a) Determine the depreciation for years 1-10. You should do this in...

A commercial smart oven that costs $150,000 is expected to operate for 6 years. The estimated salvage value at the end of 6 years is $25,000. The oven is expected to save the company $50,000 in...

A commercial smart oven that costs $300,000 is expected to operate for 7 years. The estimated salvage value at the end of 7 years is $40,000. The oven is expected to save the company $70,000 in...

A commercial smart oven that costs $150,000 is expected to operate for 6 years. The estimated salvage value at the end of 6 years is $25,000. The oven is expected to save the company $50,000 in...

1. Which formula is typically used to describe the components ofinformation security risks? A) Risk = Likelihood X Vulnerability B) Risk = Threat X Vulnerability C) Risk = Threat X Likelihood D) Risk...

The following is financial information from Cisco Systems, Inc. for its fiscal year ended in July of 2019. The tax rate is 34%. Sales Depreciation Cost of Goods Sold Other Expenses Interest Cash,...

What is the difference between a population distribution and a sampling distribution?

What actions do you commit to take immediately as a result of insights gained in this chapter?

Popeyes income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to Popeyes demand curve for spinach?

What are the supply schedule and the supply curve, and how are they related? Why does the supply curve slope upward?

Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.

The heights of residents living in a college can be said to be normally distributed with mean 180.9 cm and standard deviation 9.3 cm. Astudent, Rohan, is 166.5 cm tall. 3) Compute the standardised...

Find the nominal annual rate of interest compounded quarterly that is equivalent to 5,7% compounded monthly The nominal annually compounded rate of interest is % (Round the final answer to four...

2. Benefits of eating organic. After 5 days, the proportion of fruit flies eating organic soybeans still alive is 0.90, while the proportion still alive eating conventional soybeans is 0.84. The...