Question

A firm is considering an investment in a new machine with a price of $15.6 million...

A firm is considering an investment in a new machine with a price of $15.6 million to replace its existing machine. The new machine is expected to have a four-year life. If the firm replaces the old machine with the new machine, it expects to save $6.3 million in operating costs each year over the next four years. The new machine will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 39 percent. What are the NPV and IRR as a result of a decision to buy the new machine?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer:

There is no mention of current sale value and book value of old machine. As such we assume current sale value and book value of old machine as = $0

NPV and IRR as a result of a decision to buy the new machine are:

Workings:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm is considering an investment in a new machine with a price of $15.6 million...
A firm is considering an investment in a new machine with a price of $15.6 million to replace its existing machine. The current machine has a book value of $5.4 million and a market value of $4.1 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.3 million in...
A firm is considering an investment in a new machine with a price of $18.1 million...
A firm is considering an investment in a new machine with a price of $18.1 million to replace its existing machine. The current machine has a book value of $6.1 million and a market value of $4.6 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.8 million in...
A firm is considering an investment in a new machine with a price of $18.03 million...
A firm is considering an investment in a new machine with a price of $18.03 million to replace its existing machine. The current machine has a book value of $6.03 million and a market value of $4.53 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.73 million in...
A firm is considering an investment in a new machine with a price of $18.05 million...
A firm is considering an investment in a new machine with a price of $18.05 million to replace its existing machine. The current machine has a book value of $6.05 million and a market value of $4.55 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.75 million in...
A firm is considering an investment into a new machine with a price of $18 million...
A firm is considering an investment into a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5 million. The new machine is expected to have a four-year life, and also the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.5 million...
A firm is considering an investment in a new machine with a price of $16.1 million...
A firm is considering an investment in a new machine with a price of $16.1 million to replace its existing machine. The current machine has a book value of $5.8 million and a market value of $4.5 million. The new machine is expected to have a 4-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.5 million in...
Green Zebra wants to test out alternative energy for its facilities. It is considering an investment...
Green Zebra wants to test out alternative energy for its facilities. It is considering an investment in a new wind-energy tower with a price of $7million to replace its existing natural gas furnace. Today, the current machine has a book value of $4million and could be sold for $3.5 million. The new machine is expected to have three year life, and the old machine has three years remaining in its economic life. Both machines use straight line depreciation to a...
Green Zebra wants to test out alternative energy for its facilities. It is considering an investment...
Green Zebra wants to test out alternative energy for its facilities. It is considering an investment in a new wind-energy tower with a price of $7million to replace its existing natural gas furnace. Today, the current machine has a book value of $4million and could be sold for $3.5 million. The new machine is expected to have three year life, and the old machine has three years remaining in its economic life. Both machines use straight line depreciation to a...
Tomato plant Inc. wants to replace its current machinery which is listed in its balance sheet...
Tomato plant Inc. wants to replace its current machinery which is listed in its balance sheet with a book value of $5 million, with new machinery costing $16 million. The current machinery can be sold for $3 million. The new machinery has an expected life of four years. The current machinery can still be used for another four years. Both machinery will have no salvage value at the end of their useful lives. The replacement of the current with the...
Austalian Door Inc. wants to replace its current machinery which is listed in its balance sheet...
Austalian Door Inc. wants to replace its current machinery which is listed in its balance sheet with a book value of $5 million, with new machinery costing $16 million. The current machinery can be sold for $3 million. The new machinery has an expected life of four years. The current machinery can still be used for another four years. Both machinery will have no salvage value at the end of their useful lives. The replacement of the current with the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT