Requires initial investment in spare parts inventory

Assignment Help Financial Management

Reference no: EM131317824

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $504,000 is estimated to result in $203,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $64,500. The press also requires an initial investment in spare parts inventory of $22,900, along with an additional $4,900 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 13 percent.

Reference no: EM131317824

Questions Cloud

How much depreciation will be taken on the equipment : A taxpayer placed 7-year property in service in April 2016. This equipment cost $2,800,000. What is the amount of the 179 deduction on the equipment? What is the basis for MACRS depreciation of the equipment in 2016? How much depreciation will be tak..

Bloomberg and download five years of monthly closing prices : Use either finance.yahoo.com or Bloomberg and download five years of monthly closing prices for eight stocks and the S&P 500 Index (ticker symbol "GSPC"). Download the data into an Excel file and use the Adjusted-Close prices, which adjust for div..

Value of portfolio after that change : 1) Calculate the value of your portfolio. 2) Calculate the D, G, W and k of your portfolio. 3) If the price goes up by $2 suddenly, what is the value of your portfolio after that change?

Calculate financial ratios-compare them to industry average : Financial Analysis Attached are the Financials for Adidas - calculate their financial ratios, compare them to industry averages, say what needs to be done to help the lower ratios.

Requires initial investment in spare parts inventory : CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $504,000 is estimated to result in $203,000 in annual pretax cost savings. The press also requires an initial investment in spare..

Does not qualify for bonus depreciation : Janis bought a 2012 Mercedes Benz S550 on 1 July 2016 for 70,000. She uses it 100% in her business as a folksinger. She wishes to take the maximum amount of depreciation and 179 expense allowed on the vehicle. How much of her $70,000 cost can she rec..

What was market risk premium during these ten years : The average annual return on an Index from 1996 to 2005 was 20.25 percent. The average annual T-bill yield during the same period was 3.65 percent. What was the market risk premium during these ten years?

What is the risk premium of the portfolio : You own $14,504 of Opsware, Inc., stock that has an assumed beta of 3.85. You also own $20,384 of Lowe’s Companies (assumed beta = 1.89) and $4,312 of New York Times (assumed beta = 1.17). What is the market risk premium? What is the risk premium of ..

Sole owner of a profitable firm : Suppose that there are corporate taxes, but all the other assumptions of Modigliani and Miller hold. You are the sole owner of a profitable firm, and you must decide how to finance its operations. The optimal path would be? Why?

User Account

All Pages