Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $3,700 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $36,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $4,400 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)

Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $3,700 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $36,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $4,400 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully- depreciated vans, which you think you can sell for $4,800 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $47,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $5,500 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.) FCF Year 0 1 2 3 4 5 6
Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $4,400 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $43,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $5,100 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)
Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $4,100 apiece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life. Expected yearly before-tax cash savings due to acquiring the new vans amounts to $4,800. If your cost of capital is 8 percent and your firm faces a 34 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)
3. You are currently without a vehicle and are considering buying either a new fuel efficient Rabbit that costs $40.000 and gets 40 mpg or a used Suburban SUV (sport utility vehicle) that costs $25,000 and gets 12 mpg. Next year you expect to take a new job in Tokyo which will force you to sell your vehicle after one year. We will assume no maintenance costs on either vehicle, but the Rabbit is expected to depreciate by $5000 and the SUV is expected to depreciate by $2000. That is, one year from now you will be able to sell the Rabbit for $35.000 or you will be able to sell the SUV for $23,000. (Note: we are assuming that new cars depreciate more rapidly than used cars.) You have enough savings to pay cash for either vehicle, but the interest rate you can earn on your savings is R=5%. You expect to drive 15,000 miles during the coming year. We will assume that you are indifferent between the two vehicles. How high does the price of gasoline have to be to make it cheaper to buy the…
Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
Carla Vista Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost $56,760. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,600. At the end of 8 years, the company will sell the truck for an estimated $28,600. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset’s estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company’s cost of capital is 8%.
4. What is a Break-even Point and why do managers calculate it? 5. Branton Electric is considering the purchase of an entire cargo container filled with upgraded utility meters for $20,000. Branton can charge $50 for the installation of each upgraded meter, while the actual cost of the installation would be only $15. How many utility meter upgrades are necessary for Branton Electric to break even on this purchase? (Quick Start #16) 6. What are the advantages and disadvantages of using a conservative strategy of Capacity versus an Aggressive strategy?
A company is trying to decide whether to buy a new delivery truck to replace their old one. The old truck originally cost $32,000. The new truck will cost $45,000. If they buy the new truck, they will sell the old truck to a used truck dealer for $4,000. Based on the information given, what is the immediate total incremental cost or benefit of buying the new truck? (Indicate a net benefit as a positive number and a net cost as a negative number.)
k You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Kia Rio, which will cost $17,000 to purchase and which will have OCF of -$1,800 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $25,000 to purchase and which will have OCF of -$950 annually throughout that vehicle's expected 4-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future. If the business has a cost of capital of 12 percent, calculate the EAC. Note: Negative amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your answers to 2 decimal places. EAC Rio EAC Prius Which one should you choose?
Help me please
Indigo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,295, Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eight years, the company will sell the truck for an estimated $28.200. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Kevin Aller, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's cost of capital is 8% (a) Your answer is partially correct. Calculate the cash payback period and net present value of the proposed investment. (f the net present value is negative,…
An auto dealership is running a promotional deal whereby they will replace your tires free of charge for the life of the vehicle when you purchase your car from them. You expect the original tires to last for 30,000 miles, and then they will need replacement every 30,000 miles thereafter. Your driving mileage averages 15,000 miles per year. A set of new tires costs $400. If you trade in the car at 150,000 miles with new tires then, what is the lump-sum present value of this deal if your personal interest rate is 12% per year?