What is the capital cost associated with this project

Assignment Help Accounting Basics
Reference no: EM133162160

Question - Alpha Inc. plans to buy a new compressor at a cost of $160,000. This compressor would allow the firm to reduce its labor costs by an amount of $40,000 at the end of the next year, and then by an amount of $55,000 at the end of each of the following years. The compressor is expected to be used for ten years, after which it will be resold at its estimated market value of $80,000. The tax rate is 38% and the discount rate is 14%. The compressor is depreciated at 20% on the declining balance. There is no class closure.

Required -

1- What is the capital cost (at the beginning of the project) associated with this project?

2- What is the present value (after tax) of all 10 cash flows associated with reduced labor expenditures?

3- What is the present value of the CCA tax savings (with the half-year rule)?

4- What is the present value of the lost CCA-related tax savings from the resale of the compressor?

5- What is the net present value (NPV) of the investment project?

Reference no: EM133162160

Questions Cloud

Environmental involvement : Identify a Federal agency that particularly impressed you with their environmental involvement.
What we need to do to improve our environment : Take this bonus discussion board opportunity to discuss what we need to do to improve our environment.
Documentary blue gold-water wars : How many liters of water does it take to produce 1 apple in California? Cochabamba is a city in which country?
Diminish environmental sustainability : What impact does the product have on the environment? Describe how individual choices and/or behavior contribute to or diminish environmental sustainability.
What is the capital cost associated with this project : Alpha Inc. plans to buy a new compressor at a cost of $160,000. What is the capital cost (at the beginning of the project) associated with this project
What are the order costs and carrying costs : If EOQ = 100 units, safety stock level is 40 units, annual usage is 1040 units, cost per order is $480.80, What are the order costs and carrying costs
What the order point : Normal lead time in working days, 30. Units of material A will be required evenly throughout the year. What the order point
What would be the expected return and beta : What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25;
What is the correct objective function : A, B, and C. it takes 1.5 hours to produce 1000 bottles of the Formula A, 2 hours to produce 1000 bottles of formula B, What is the correct objective function

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare the adjusted bank balance section

Prepare the adjusted bank balance section and the adjusted book balance section of the bank reconciliation statement

  How much of the costs should be capitalised

Using the principles of IAS 16 how much of the costs should be capitalised? Labour costs, including $90,000 incurred during an industrial dispute.

  Discuss function of the erp software''s capabilities

One of the criticisms of enterprise resource planning is that the decision making associated with its use frequently is a function of the ERP softwares

  How much would total lending capacity of the banking system

Assuming these numbers from the Federal Reserve Bank, How much would the total lending capacity of the banking system be after this portfolio switch?

  What correct rent expense for the given period would be

The balance sheet date is December 31, 2020. The prepayment was recorded under asset method. The correct rent expense for the given period would be

  What will be the amortization value of that company

Pharmaceutical Company spent $20 million dollars on a drug patent with a useful life of 20 years.

  Find how much was baltimore revenue for the year

$49,000 capital stock during the year. No dividends were paid. Expenses incurred during the year were $84,000. How much was Baltimore's revenue for the year?

  What is the ending balance of office? supplies

Office? Supplies, had a beginning balance of $3,700. Supplies Expense for the accounting period is $4,200. What is the ending balance of Office? Supplies?

  Prepare a multiple-step income statement for the November

A physical count determined that merchandise inventory on hand at November 30, 2021, was $37,440. Prepare a multiple-step income statement for the November

  What is your estimate of callahan cost of common equity

If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity

  What amount of units must be sold in order to realize

RM500, 000 and the unit contribution margin is RM12, what amount of units must be sold in order to realize an operating income of RM100, 000?

  Abc auto insurance classifies drivers as good medium or

abc auto insurance classifies drivers as good medium or poor risks. drivers who apply to them for insurance fall into

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd