Follow the instructions carefully for both documents and complete assignments. You can only use internet references if you must use any at all. Document Preview: Week 2 Individual Assignment - Highlighted are the correct answers to each of the problems. Refer to the pdfs for each question and tell how you get to the final answer. Write out the explanation according to the readings in the pdfs. Make sure you write down the step by step scenarios for each question of how you got the answers. Also, any work completed on excel must be embedded within the word file so that if the professor clicks on it he can see all of the calculations. Please follow these instructions carefully as points will be taken off for any little mistake. 2.1. Warszawa Company is interested in buying a machine for $50,000 with uncertain life. The following table shows its expected life and resale value: Expected life Probability Resale value 5 years 5% $5000 6 years 15% $4000 7 years 80% $3000 The machine will save the company $10,000 annually while it is running. Warszawa will depreciate it fully on a straight-line basis in 5 years. The tax rate of Warszawa is 30%, and the proper discount rate in this case is 11%. Should Warszawa buy it? NPV = -5650.79, no? 2.2. Krak?w Company plans to buy a new machine for $40,000, which will save the company $11,000 annually. Krak?w will depreciate the machine on the ACRS with three-year life, the annual depreciation being 25%, 50%, and 25%. The company will use the equipment for 6 years, and then sell it for $5,000. The tax rate of the company is 32% and it will use 9% as the discount rate. Should Krak?w buy the machine? NPV = $6375.50, yes? 2.3. L?dz Incorporated wants to buy a new machine, which costs $300,000. L?dz will depreciate it fully over its useful life of 6 years, on a straight-line basis. It will then sell the machine for $25,000. L?dz has income tax rate of 35% and it uses a discount rate of 11%. Calculate the minimum pre-tax annual earnings generated by this machine to justify its purchase. $79,014.38? 2.4. Wroclaw Corporation wants to buy a machine... Attachments: 508C04.pdf 508C05.pdf Week-2-Discus....docx Week-2-Indivi....docx
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