Aries Incorporated wants to buy a new machine, which costs $24,000. Aries will depreciate it fully over its useful life of 6 years, on a straight-line basis. Aries has income tax rate of 35% and it...

2.1. Aries Incorporated wants to buy a new machine, which costs $24,000. Aries will depreciate it fully over its useful life of 6 years, on a straight-line basis. Aries has income tax rate of 35% and it uses a discount rate of 7%. Calculate the minimum pre-tax annual earnings generated by this machine to justify its purchase. $5592.46 ? 2.2. National Cancer Institute is planning to acquire an NMR machine at a cost of $24 million. The machine has an uncertain life span: it may last for 6 years (probability 50%), 7 years (probability 30%), or 8 years (probability 20%). The Institute will depreciate the machine on a straight-line basis with a life of 6 years, with no residual value. While the machine is in operation, it will generate a pretax income of $6 million annually. The tax rate of Institute is 40% and it uses a discount rate of 9%. Should the Institute buy the new machine? Yes, NPV = $672,782 ? 2.3. Capricorn Company is interested in buying a computer with uncertain life. The following table shows its expected life and resale value: Expected lifeProbabilityResale value3 years20%$20,0004 years30%$10,0005 years50%$5,000The computer will save the company $40,000 annually while it is running. Capricorn will depreciate it fully on a straight-line basis in 3 years. The tax rate of Capricorn is 30%, and the proper discount rate in this case is 12%. The cost of the computer is $90,000. Should Capricorn buy it? Yes, NPV = $25,367.91 ? 2.4. Gemini Corporation wants to buy a machine and depreciate it over a five-year period with no salvage value. The machine will generate pre-tax revenue of $20,000 annually, the tax rate of Gemini is 32%, and the proper discount rate is 11%. The machine has uncertain life: it may run for 5 years (probability 50%), 6 years (probability 30%), or 7 years (probability 20%). What is the maximum price that Gemini should pay for the machine? $72,315 ? 2.5. Virgo Corporation is considering the purchase of a new machine that...