question 4

totras 1. Daily Enterprises is purchasing an $8 million machine. It will cost $70,000 to tr port and install it. The machine has a depreciable life of eight years and will no salvage value. If Daily uses straight-line depreciation, what are the depreciati expenses associated with this machine? 2. The machine in Problem I will generate incremental revenues of $5 million pero along with incremental costs of $2.3 million per year. If Daily's marginal tax rate 40%, what are the incremental earnings associated with the new machine? 3. You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 18% over the current amount of 250,000 units. If your sales price is $25 per unit, what are the incremental revenues next year from the upgrade? 4. Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects! that sales of the new pizza will be $50 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 30% will come from customers who switch to the new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza? b. Suppose that 60% of the customers who would switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case? * 5. Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $9 million this year and by $7 million noxt year. Ir tion, the company expects that new consumers who try the M i M i alomochi's other products. As a resul the