Question
In: Finance
Replacement Analysis Although the Chen Company's milling machine is old, it is still in relatively good...
Replacement Analysis
Although the Chen Company's milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $120,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $18,900 per year. It would have zero salvage value at the end of its life. The Project cost of capital is 9%, and its marginal tax rate is 35%. Should Chen buy the new machine? Do not round intermediate calculations. Round your answer to the nearest cent. Negative value, if any, should be indicated by a minus sign.
NPV: $ ??
Should or shouldn't Chen purchase the new machine?
Solutions
jeff jeffy answered 5 hours agoRelated Solutions
Replacement Analysis Although the Chen Company's milling machine is old, it is still in relatively good...
Replacement Analysis
Although the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it.
The new milling machine, at a cost of $120,000 delivered and
installed, would also last for 10 years and would produce after-tax
cash flows (labor savings and depreciation tax savings) of $19,300
per year. It would have zero salvage...
Although the Chen Company's milling machine is old, it is still in relatively good working order...
Although the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it. The new milling
machine, at a cost of $41,000 delivered and installed, would also
last for 10 years and would produce after-tax cash flows (labor
savings and depreciation tax savings) of $8,400 per year. It would
have zero salvage value at...
Although the Chen Company's milling machine is old, it is still in relatively good working order...
Although the Chen Company's milling machine is old, it
is still in relatively good working order and would last for
another 10 years. It is inefficient compared to modern standards,
though, and so the company is considering replacing it. The new
milling machine, at a cost of $38,000 delivered and installed,
would also last for 10 years and would produce after-tax cash flows
(labor savings and depreciation tax savings) of $8,600 per year. It
would have zero salvage value at...
Although the Chen Company's milling machine is old, it is still in relatively good working order...
Although the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it. The new milling
machine, at a cost of $112,000 delivered and installed, would also
last for 10 years and would produce after-tax cash flows (labor
savings and depreciation tax savings) of $19,900 per year. It would
have zero salvage value at...
Problem 11-04 Replacement Analysis Although the Chen Company's milling machine is old, it is still in...
Problem 11-04
Replacement Analysis
Although the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it. The new milling
machine, at a cost of $41,000 delivered and installed, would also
last for 10 years and would produce after-tax cash flows (labor
savings and depreciation tax savings) of $9,000 per year. It would
have...
Problem 11-04 Replacement Analysis Although the Chen Company's milling machine is old, it is still in...
Problem 11-04
Replacement Analysis
Although the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it. The new milling
machine, at a cost of $41,000 delivered and installed, would also
last for 10 years and would produce after-tax cash flows (labor
savings and depreciation tax savings) of $8,900 per year. It would
have...
Replacement AnalysisAlthough the Chen Company's milling machine is old, it is stillin relatively good...
Replacement AnalysisAlthough the Chen Company's milling machine is old, it is still
in relatively good working order and would last for another 10
years. It is inefficient compared to modern standards, though, and
so the company is considering replacing it. The new milling
machine, at a cost of $104,000 delivered and installed, would also
last for 10 years and would produce after-tax cash flows (labor
savings and depreciation tax savings) of $18,700 per year. It would
have zero salvage value...
Replacement analysis Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a...
Replacement analysis
Mississippi River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $24,000 to $48,000 per year. The
new machine will cost $82,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering
the replacement of an 8-year-old riveting machine with a new one
that will increase earnings before depreciation from $27,000 to
$56,000 per year. The new machine will cost $82,500, and it will
have an estimated life of 8 years and no salvage value. The new
machine will be depreciated over its 5-year MACRS recovery period,
so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%,
and 6%. The applicable corporate tax...
You are considering the replacement of an old machine by a new one. The old machine...
You are considering the replacement of
an old machine by a new one. The old machine was bought 5 years ago
for $120,000 and is being depreciated (straight line) for a zero
salvage value over a 15-year depreciable life. The current market
value of this machine is $60,000. The new machine, which will cost
$150,000 (with installation cost) will be depreciated (again, on a
straight-line basis) over a 10-year life with a $30,000 salvage
value.
The new machine will increase...
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