Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(b) QRW Corp. needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase
(b) QRW Corp. needs to replace an old machine with a new, more efficient model. The new machine being considered will result in an increase in earnings before interest and taxes of $70,000 per year. The purchase price is $200,000, and it would cost an additional $10,000 to properly install the machine. In addition, to properly operate the machine, inventory must be increased by $10,000. This machine has an expected life of 10 years, with no salvage value. Assume that a straight-line depreciation method being used and that this machine is being depreciated down to zero, the marginal tax rate is 34%, and a required rate of return of 15%. [ORW Corp. perlu menggantikan mesin lama dengan model baharu yang lebih efisyen. Mesin baru yang sedang dalam pertimbangan itu akan memberi peningkatan pendapatan sebelum faedah dan cukai sebanyak $70,000 setahun. Harga beliannya ialah sebanyak $200,000, dan terdapat tambahan kos sebanyak $10.000 untuk pemasangan dengan betul. Selain itu, untuk pengendalian mesin dengan betul. inventori mesti ditingkatkan sebanyak $10,000. Mesin ini mempunyai jangka hayat selama 10 tahun, dan tiada nilai sisa. Andaikan kaedah susut nilai garis lurus digunapakai dan mesin ini disusutilaikan kepada sifar, kadar cukai marginal ialah 34% dan kadar pulangan yang diperlukan ialah sebanyak 15%) (i) Solve for the value of the initial outlay associated with this project. (Selesaikan untuk nilai modal awal yang berkaitan dengan projek ini.) (3 Marks/ Markah) (ii) Solve for the value of annual after-tax cash flows for this project from years 1 through 9. [Selesaikan untuk nilai bagi aliran tunai tahunan selepas cukai untuk projek ini dari tahun 1 hingga 9.) (4 Marks/ Markah) ....3/- SULIT SULIT (SMP10703) -3- Solve for the value of terminal cash flow in year 10 (annual after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the project). [Selesaikan untuk nilai bagi aliran tunai terminal pada tahun ke-10 (aliran tunai selepas cukai tahunan pada tahun 10 ditambah sebarang aliran tunai tambahan yang berkaitan dengan penamatan projek). (3 Marks / Markah) (iv) Solve for the value to show whether this machine should be purchase or not. Selesaikan untuk nilai bagi menunjukkan samada mesin ini perlu dibeli atau pun tidak.]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started