Question

Q) Your corporation is considering replacing older equipment.  The old machine is fully depreciated and cost  $53,633.00  seven years...

Q) Your corporation is considering replacing older equipment.  The old machine is fully depreciated and cost  $53,633.00  seven years ago.  The old equipment currently has no market value. The new equipment cost $55,937.00 .  The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $14,087.00 .  The new equipment is expected to save the firm $15,718.00  annually by increasing efficiency and cost savings.  The corporation has tax rate of  29.85%  and a required return on capital of  10.02% .          

a) What is the total initial cash outflow? (show as negative number )    

b) What are the estimated annual operating cash flows?   

c) What is the terminal cash flow?      

d) What is the NPV for this project?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
[Use the following information to answer the next 4 questions] Your corporation is considering replacing older...
[Use the following information to answer the next 4 questions] Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $51800 seven years ago. The old equipment currently has no market value. The new equipment cost $63100. The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $37500. The new equipment...
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with...
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate. The old machine has been depreciated over 3 years using straight line depreciation. Its original installation cost was $15,000. The old machine has been in use for 2 years, and it can be traded in for $3,500. The new machine will be purchased $24,000 and it will also be depreciated over 3 years using...
3. Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it...
3. Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate. The old machine has been depreciated over 3 years using straight line depreciation. Its original installation cost was $15,000. The old machine has been in use for 2 years, and it can be traded in for $3,500. The new machine will be purchased $24,000 and it will also be depreciated over 3 years...
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage...
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $84,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $25,000 to $50,000 per...
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage...
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $83,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $25,000 to $50,000 per...
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with...
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate.  The old machine has been depreciated over 3 years using straight line depreciation. Its original installation cost was $15,000.  The old machine has been in use for 2 years, and it can be traded in for $3,500.    The new machine will be purchased $24,000 and it will also be depreciated over 3 years using the straight...
Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has...
Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $81,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $29,000 to...
A company wants to replace old machine by new one. Old is fully depreciated and no...
A company wants to replace old machine by new one. Old is fully depreciated and no salvage value is expected. New will provide annual cash saving by $7.000 before income taxes and without regard to the effect of depreciation. Machine (new) costs $18.000 , estimated useful life is 5 years. No salvage value will be for the n ew one. Straight line depreciation method will be used. Income tax is %40. Desired rate of return is %14. Please evaluate this...
Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has...
Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $182,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $29,000 to...
LoRusso Co. is considering replacing an existing piece of equipment. The project involves the following: •...
LoRusso Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $1,800,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left...