Please complete #20 and #21
straight-line depreciation to 2e10 $45,000. If your tax rate is 35 percent and your discount Pale iS IO the EAC for both machines. Which do you prefer? Why? with 140,000 cartons of machine screws per year to support its manufactupply over the next five years, and you've decided to bid on the contract. It wi 940,000 to install the equipment necessary to start productior this cost straight-line to zero over the project's life. You estimate that, in this equipment can be salvaged for $85,000. Your fixed production costs e ye $435,000 per year, and your variable production costs should be $15.10 You also need an initial investment in net working capital of $90000o is 35 percent and you require a return of 12 percent on your invest price should you submit? 18. Calculating a Bid Price [LO3] Romo Enterprises needs someo per c If your tax rate what bid 19. Cost-Cutting Proposals [LO2] Warmack Machine Shop i considering a fo year project to improve its production efficiency. Buying a new machine press fon $410,000 is estimated to result in $155,000 in annual pretax cost savings. The preu falls in the MACRS five-year class, and it will have a salvage va;ue at the end of bhe project of $55,000. The press also requires an initial investment in spare parts inven. tory of $20,000, along with an additional $3,100 in inventory for each year of the project. If the shop's tax rate is 35 percent and its discount rate is 9 cent, should the company buy and install the machine press? 20. Comparing Mutually Exclusive Projects [LO1] Lang Industrial Systems Com pany (LISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life, and requires $80,000 in pretax annual oper ating costs. System B costs $375,000, has a six-year life, and requires $74,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it w not be replaced when it wears out. If the tax rate is 34 percent and the discount rate is 8 percent, which project should the firm choose? 21. Comparing Mutually Exclusive Projects [LO4] Suppose in the previous problea that LISC always needs a conveyor belt system; when one wears out, it must be replaced. Which project should the firm choose now? 22. Calculating a Bid Price [LO3] Consider a project to supply 100 million posags tamps per year to the U.S. Postal Service for the next five years. You have parcel of land available that cost $850,000 five years ago: if the land were sold it would net you $1,080,000 aftertax. The land can be sold for $1,150,000 after in five years. You will need to install $4.6 million in new manufacturing plan equipment to actually produce the stamps; this plant and equipment will be traight-line to zero over the project's five-year life. The equipnie initial sold for $400,000 at the end of the project. You will also need $600 working capital for the project, and an additional i be ,000 in
