Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10
Question:
Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer, more sophisticated machine. The new machine will cost $200,000 and will require $30,000 in installation costs. It will be depreciated under MACRS using a 5-year recovery period. A $25,000 increase in net working capital will be required to support the new machine. The firm’s managers plan to evaluate the potential replacement over a 4-year period. They estimate that the old machine could be sold at the end of 4 years to net $15,000 before taxes; the new machine at the end of 4 years will be worth $75,000 before taxes. Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The firm is subject to a 40% tax rate.
Step by Step Answer:
Aftertax proceeds from sale of new asset Proceeds from sale of new machine 75000 Tax o...View the full answer
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Students also viewed these Finance questions
-
The Columbus Electronics Company is considering replacing a 1,000-pound-capacity forklift truck that was purchased three years ago at a cost of $15,000. The diesel-operated forklift was originally...
-
The management of Langdale Mill is considering replacing a number of old looms in the mill's weave room. The looms to be replaced are two 86-inch President looms, sixteen 54-inch President looms, and...
-
A firm is considering replacing a machine that has been used to make a certain kind of packaging material. The new, improved machine will cost $31,000 installed and will have an estimated economic...
-
The main ingredient of vinegar is acetic acid (HAc) that will dissociate into acetate (Ac - ) and hydrogen ion (H + ) in water: HAc < = > Ac - (aq) + H + (aq) . K HAc(room temp) = 1.8x10 -5 ....
-
Explain why premiums and discounts on bond investments must be amortized when using the amortized cost model and why no amortization occurs when using the fair value through profit or loss model?
-
A \(50 \mathrm{~kg}\) sprinter, starting from rest, runs \(50 \mathrm{~m}\) in \(7.0 \mathrm{~s}\) at constant acceleration. a. What is the magnitude of the horizontal force acting on the sprinter?...
-
Use technology and the data in RestaurantTips to construct a graph of the relationship between Server and Credit for the situation in Exercise 2.38. Data From Exercise 2.38: Credit Card by Server The...
-
The chapter opener discusses the series of problems Nike has had with some of its endorsers because of controversies that have arisen in their personal lives. Discuss how the problems surrounding...
-
1. Sand is leaking from the back of a dump truck and forming a conical pile on the ground. The sand is leaking at the rate of 0.7 m per hour. If the base radius of the pile is always 0.2 times the...
-
You, CPA, work as a consultant on various engagements. Your client, Over The Edge Ltd. (OTE), has grown from a small custom snowboard manufacturer servicing the local market to a multinational...
-
Looner Industries is currently analyzing the purchase of a new machine that costs $160,000 and requires $20,000 in installation costs. Purchase of this machine is expected to result in an increase in...
-
Marcus Tube, a manufacturer of high-quality aluminum tubing, has maintained stable sales and profits over the past 10 years. Although the market for aluminum tubing has been expanding by 3% per year,...
-
A dehumidifier brings in saturated wet air (100 percent relative humidity) at 30C and 1 atm, through an inlet of 8-cm diameter and average velocity 3 m/s. After some of the water vapor condenses and...
-
What are the different ways by which the environmental footprint of LSCM can be reduced?
-
The Common Logistics/Supply Chain Strategies and Practices box earlier in this chapter listed many logistics/supply chain strategies and practices. In your view, are all of these carried out...
-
Assume that Microsoft has no debt, a total market value of $2 trillion, and a marginal tax rate of 21%. If it permanently changes its leverage from no debt by taking on new debt in the amount of 13%...
-
Why do you think logistics and supply chain managers require a T-shaped skills profile?
-
Which of the following corporate structures does not offer limited liability for its owners? a. A sole proprietorship b. A limited liability corporation c. A C corporation d. An S corporation
-
How would it help to know what relationships and social capital a candidate for an important international role has? Would these relationships be more or less important than their general...
-
Explain briefly what is meant by electronic data interchange (EDI). How does EDI affect a companys audit trail?
-
Which mineral is the main source of barium? Give its name and formula.
-
What are the two ways that firms can distribute cash to shareholders?
-
Why do rapidly growing firms generally pay no dividends?
-
The dividend payout ratio equals dividends paid divided by earnings. How would you expect this ratio to behave during a recession? What about during an economic boom?
-
1. Q: What is a firewall rule? 2. Q: What is a binary search algorithm? 3. Q: What is multi-threading? 4. Q: What is a software bug? 5. Q: What is XSS (Cross-Site Scripting)? 6. Q: What is a...
-
1. Q: What is a subnet mask? 2. Q: What is a recursive function in programming? 3. Q: What is version control branching? 4. Q: What is a deadlock in concurrent programming? 5. Q: What is the...
-
1. Q: What is a pointer in programming? 2. Q: What is an algorithm complexity analysis? 3. Q: What is the difference between a stack and a heap in memory management? 4. Q: What is the purpose of an...
Study smarter with the SolutionInn App