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(Solution Download) 1. You are evaluating two different silicon wafer milling machines. The Techron I costs $246,000, ha


 

 

 

 

 

 

 

1. You are evaluating two different silicon wafer milling

 

machines. The Techron I costs $246,000, has a three-year life, and

 

has pretax operating costs of $65,000 per year. The Techron II

 

costs $430,000, has a five-year life, and has pretax operating

 

costs of $38,000 per year. For both milling machines, use

 

straight-line depreciation to zero over the projectAc??cs life and

 

assume a salvage value of $42,000. If your tax rate is 34 percent

 

and your discount rate is 8 percent, compute the EAC for both

 

machines. (Negative amounts should be indicated by a minus

 

sign. Do not round intermediate calculations and round your final

 

answers to 2 decimal places. (e.g., 32.16))

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EAC
  Techron I$
  Techron II$

 

 

 

 

 

 

 

 

 

2. A proposed new project has projected sales of $134,000, costs

 

of $68,000, and depreciation of $13,700. The tax rate is 35

 

percent. Calculate operating cash flow using the four different

 

approaches.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  ApproachesOperating cash

 

flow

  EBIT + Depreciation

 

- Taxes

$

 

   

  Top-down$

 

   

  Tax-shield$

 

   

  Bottom-up$

 

   

 

 

 

 

 

 

 

 

3. Keiper, Inc., is considering a new three-year expansion

 

project that requires an initial fixed asset investment of $2.43

 

million. The fixed asset will be depreciated straight-line to zero

 

over its three-year tax life, after which time it will be

 

worthless. The project is estimated to generate $1,990,000 in

 

annual sales, with costs of $685,000. The tax rate is 30 percent

 

and the required return on the project is 18 percent. What is the

 

projectAc??cs NPV? (Round your answer to 2 decimal places.

 

(e.g., 32.16))

 

 

 

 

 

 

 

 

 

  NPV$

 


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