Analyzing the purchase of new equipment

Reference no: EM131117658

You are analyzing the purchase of new equipment. Since you are not an expert on this type of equipment, you hire a consulting firm to make recommendations. The consultant charged you $1,500 and recommended the purchase of the latest model from ACME Corp. of America. The equipment costs $80,000, and it will cost another $10,000 to modify it for special use by your firm.

The equipment will be depreciated on a straight-line basis over six years with no salvage value. You expect the equipment will be sold after three years for $28,000. Use of the equipment will require an increase in your company's net working capital of $4,000, but this $4,000 will be recovered at the end of year three. The use of the equipment will have no effect on revenues, but it is expected to save the firm $50,000 per year in before-tax operating costs. Your company's marginal tax rate is 35%. What is the terminal cash flow for this project? a. $17,000 b. $24,500 c. $33,950 d. $37,950

Reference no: EM131117658

Questions Cloud

Shapes of the supply and demand curves for reserves : 1. Draw and explain shapes of the supply and demand curves for reserves. 2. Illustrate by sketching the relevant figures,the situation on the market for reserves when:

Determine the net present value of the projects : Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects.

Portfolio weights for a portfolio : What are the portfolio weights for a portfolio that has 134 shares of Stock A that sell for $44 per share and 114 shares of Stock B that sell for $34 per share?

Using the conventional retail method : Using the conventional retail method, prepare a schedule computing estimated lower of-cost-or-market inventory for October 31, 2011.

Analyzing the purchase of new equipment : You are analyzing the purchase of new equipment. Since you are not an expert on this type of equipment, you hire a consulting firm to make recommendations. The consultant charged you $1,500 and recommended the purchase of the latest model from ACM..

Will the sports exports company be favorably or unfavorably : Given Jim's expectations forecast whether the pound will appreciate or depreciate against the dollar over time. Given Jim's expectations, will the Sports Exports Company be favorably or unfavorably affected by the future changes in the value of the p..

What is the future value : What is the future value of $1,400, placed in a savings account for four years if the account pays 8.00%, compounded quarterly? (Your answer should be correct to two decimal places)

What distinguishes a loop control construct : What distinguishes a Loop control construct from a While control construct, in terms of what is known about the number of times the block of code will be repeated?

Company current economic value added : Total operating capital = $9,050. Assuming Greshak's WACC is 12%, what is the company's current Economic Value Added (EVA)?

User Account

All Pages