please answer the questions and show work

Fin 3343

Chapter 10 Homework Name_____________________

1. Maple Inc. just purchased a machine for $20,000 to use on a new project. The shipping costs are $4,500 and installation charges total $2,000. Maple is anticipating an increase of $10,000 in net working capital requirements. The machine is being depreciated straight line over 7 years to an estimated salvage value of $2,000. What is the annual depreciation expense?

1. Cowboy Video wants to expand their DVD library to 9,000 DVDs. The purchase price of the additional DVDs is $90,000 and the shipping costs are another $4,500. The owner will have to spend an additional $12,000 for shelves. He is expects there to be an increase in net working capital requirements of $6,500 and interest expenses to add $7,000 to the operating costs. What is the net investment for Cowboy Video for this project?

1. Okie Industries purchased a CNC machine 5 years ago for $125,000. It is being depreciated on a straight-line basis over 15 years to an estimated salvage value of $0. It could be sold now for $50,000. The firm is considering selling if and purchasing a new one. The new CNC machine would cost $208,750 installed and would be depreciated straight-line over 10 years to an estimated $0 salvage value. The firm’s marginal tax rate is 40%. Determine the net investment if the old machine is sold and the new one purchased.

1. Ten years ago T-Bone Company purchased a drill for $250,000. It was being depreciated on a straight line basis to an estimated $25,000 salvage value over a 15 year period. The firm is considering selling the old drill and purchasing a new one that would cost $500,000. The firm’s marginal tax rate is 40%. Determine the NINV required to purchase the new drill, if the old drill is sold for $100,000.

1. A project is expected to generate earnings before taxes (EBT) of $75,000 per year. Annual depreciation from the project is $45,000 and the firm’s tax rate is 40%. Determine the project’s annual net cash flows.

1. A lathe costs $30,000 and is expected to have a 7 year life. The lathe will be depreciated straight line over 7 years to an estimated salvage value of $2,000. This machine is expected to reduce the firm’s cash operating costs by $5,500 per year. If the firm is in the 40% marginal tax bracket, determine the annual net cash flows generated by the drill press.

1. The management of Maverick Equipment Company is planning to purchase a new extruder that will cost $175,000 installed. The old machine has been fully depreciated, but can be sold for $18,000. The new machine will be depreciated on a straight line basis over its 10 year economic life to an estimated salvage of $10,000. If the machine will save Maverick $30,000 a year in production expenses, what are the annual net cash flows associated with the purchase of this machine? Assume a marginal tax rate of 40%.

1. RockRidge is going to purchase a new commercial oven. It will cost $25,000 installed. The new oven replaces an oven that cost $2,000 when purchased 5 years ago. The old oven has been fully depreciated but has a market value of $3,000. Assume the marginal tax rate if 40%. What is the net investment?

1. WanderThisWorld will purchase a new piece of equipment that will replace an older, less efficient, one. The new one costs $350,000 and shipping costs are $10,000. Improving the lines to the new equipment will cost an additional $17,000. The old piece of equipment has a book value of $25,000 and can be sold for $12,000. The installation of the new equipment will increase inventories by $8,000, A/R by $20,000, and A/P by $10,000. If they have a marginal tax rate of 40%, what is the NINV for the piece of equipment?