Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 22% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is $ (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) Year 1 2 3 4 Book values at end of year 4 SL $ $ S 67 (9 150% DB 200% DB Cost Item Hardware Training Installation $[1] $ Cost $165,000 $15,000 $15,000
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- Cisco Systems is purchasing a new bar code scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 25% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (a) The cost basis of the device is (Round to the nearest dollar) (b) Annual depreciaitions and book values: (Round to the nearest dollar) Year 1 2 3 4 Book values at end of year 4 SL $ 150% DB $ 200% DB $ $ C Cost Item Hardware Training Installation Cost $165,000 $16,000 $14,000Cisco Systems is purchasing a new bar code - scanning device for its service center in San Francisco. The table on the right lists the relevant initial costs for this purchase. The service life of the system is 4 years and its salvage value for depreciation purposes is expected to be about 23% of the hardware cost. a. What is the cost basis of the device? b. What are the annual depreciations of the device if (i) the SL method is used? (ii) the 150% DB method is used? (iii) the 200% DB method is used? c. Calculate the book values of the device at the end of 4 years using all the methods above. Answers: (Round to the nearest dollar) (a) The cost basis of the device is $ (b) Annual depreciaitions and book values: (Round to the nearest dollar) Year 1 2 3 4 Book values at end of year 4 SL 69 69 69 69 69 150% DB 69 $ $ 200% DB 69 69 69 12 Cost Item Hardware Training Installation Cost $160,000 $16,000 $17,000Cisco Systems is purchasing a new bar code–scanning device for its servicecenter in San Francisco. The table that follows lists the relevant cost items for this purchase. The operating expenses for the new system are $10,000 per year, and the useful life of the system is expected to be five years. The SV for depreciation purposes is equal to 25% of the hardware cost. Solve, a. What is the BV of the device at the end of year three if the SL depreciationmethod is used? b. Suppose that after depreciating the device for two years with the SL method, the firm decides to switch to the doubledeclining balance depreciation method for the remainder of the device’s life (the remaining three years). What is the device’s BV at the end of four years?
- Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $32,000 (delivered). An additional $4,000 will be needed to install the device. The new device has an estimated 18-year service life. The estimated salvage value at the end of 18 years will be $2,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $15,000) has been in use for 9 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $2,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 10 percent. What is the NPV?Jing Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected (see the attached image). If the old equipment is replaced now, it can be sold for P60,000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. Each of the assets has no end-of-life salvage value. How much is the net advantage (disadvantage) of replacing the old equipment with the new equipment?Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $28,000 (delivered). An additional $1,000 will be needed to install the device. The new device has an estimated 17-year service life. The estimated salvage value at the end of 17 years will be $1,000. The new control device will be depreciated as a 7-year MACRS asset. The existing control device (original cost = $20,000) has been in use for 10 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $1,500. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm's marginal tax rate is 40 percent. The new control device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $5,000. The firm's cost of capital is 14 percent.Evaluate the relative merits of…
- A robotics firm decides to install the latest computer server at a cost of $2 million which is going to increase its computational capacity. The installation cost is $200,000. The firm decides to use the server for the next eight years and then sell it at a price of $200,000. Using a straight line method, what will be the annual depreciation amount?Super Apparel wants to replace an old machine with a new one. The new machine would increase annual revenue by $200,000 and annual operating expenses by $80,000. The new machine would cost $400, 000. The estimated useful life of the machine is 10 years with zero salvage value. i. Compute the Accounting Rate of Return (ARR) of the machine using the above information. ii. Should Super Apparel purchase the machine if management wants an Accounting Rate of Return (ARR) of 19% on all capital investments? Hint: Use Average Income or Profit after deducting tax, depreciation, and operating expenses.Two different types of hydraulic equipment are being considered for a certain power plant. Machine A has a first cost of P15,000, and a salvage value of P1,500, life is 6 years and has an annual maintenance an operating cost of P900. Machine B has a first cost of P18,000, life of 8 years with no salvage value. Annual operating cost is P750. Which machine would be used to justify the purchase of such machine if money is worth 7% and compute the difference between its equivalent present worth? Show solutions.
- Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells for $29,000 (delivered). An additional $3,000 will be needed to install the device. The new device has an estimated 20-‐year service life. The estimated salvage value at the end of 20 years will be $2,000. The new control device will be depreciated as a 7-‐year MACRS asset. The existing control device (original cost = $15,000) has been in use for 12 years, and it has been fully depreciated (that is, its book value equals zero). Its scrap value is estimated to be $1,000. The existing device could be used indefinitely, assuming the firm is willing to pay for its very high maintenance costs. The firm’s marginal tax rate is 40 percent. The newcontrol device requires lower maintenance costs and frees up personnel who normally would have to monitor the system. Estimated annual cash savings from the new device will be $9,000. The firm’scost of capital is 12 percent. Evaluate the relative merits…Nguyen Inc. is considering the purchase of a new computer system (ICX) for $140,000. The system will require an additional $20,000 for installation. If the new computer is purchased it will replace an old system that has been fully depreciated. The new system will be depreciated over a period of 8 years using straight-line depreciation. If the ICX is purchased, the old system will be sold for $20,000. The ICX system, which has a useful life of 8 years, is expected to increase revenues by $31,000 per year over its useful life. Operating costs are expected to decrease by $3,000 per year over the life of the system. The firm is taxed at a 40 percent marginal rate. Round your answers to the nearest dollar. A. what investment is required to acquire the ICX system and replace the old system? B. compute the annual net cash flows associated with the purchase of the ICX system.Crane Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Original cost Estimated life Salvage value Estimated annual cash inflows Estimated annual cash outflows Net present value Machine A $77,000 8 years 0 Profitability index $19,900 $4,800 Machine A Which machine should be purchased? Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative. use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine B should be purchased. $188,000 8 years 0 $40,200 $9,860…