Most economical useful life of machine on before tax basis

Assignment Help Financial Management

Reference no: EM131980751

Your firm is in need of a machine that costs $5000. During the first year the maintenance costs are estimated to be $400. The maintenance costs are expected to increase by $150 each year up to a total of $1750 at the end of Year 10. The machine can be depreciated over 5 years using the straight-line method. Assume each year's depreciation is a known amount Dy. There is no salvage value. Develop an expression to show how you would find the most economical useful life of this machine on a before tax basis. Contributed by D. P. Loucks, Cornell University.

Reference no: EM131980751

Questions Cloud

What will the cash flow for the year : What will the cash flow for the year be to Mary if she issues stock and remains open 6 days a week?

What is the weighted average cost of capital for this firm : If the corporate tax rate is 34%, what is the Weighted Average Cost of Capital (WACC) for this firm?

What must the expected return on stock be : The expected return on the market is 10 percent, and the risk-free rate is 3 percent. What must the expected return on this stock be?

Which are the relevant costs for the old machine : A pulpwood-forming machine was purchased and installed 8 years ago for $50,000. Which are the relevant costs for the old machine?

Most economical useful life of machine on before tax basis : Develop an expression to show how you would find the most economical useful life of this machine on a before tax basis.

What is the capitalization of the market portfolio : The share prices for stocks A and B are $15 and $5, respectively. What is the capitalization of the market portfolio?

Required in order to maintain positive operating ratio : What is the minimum yield on investments required in order to maintain a positive operating ratio?

What is weighted average cost of capital for firm : The current stock price for company is $47 per share and there are 4 million shares outstanding. what is Weighted Average Cost of Capital (WACC) for this firm?

What are the net cash flows of the project each year : Assume that the tax rate is 35 percent and the required return on the project is 7 percent. What are the net cash flows of the project each year?

User Account

All Pages