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In: Finance
XYZ corp. is considering investing in a new machine. The new machine cost will $10,000 installed....
XYZ corp. is considering investing in a new machine. The new machine cost will $10,000 installed. Depreciation expense will be $1000 per year for the next five years. At the end of the fifth year XYZ expects to sell the machine for $6000. XYZ will also sell its old equipment today that has a book value of $3000 for $3000. In five years, the old machine will be fully depreciated and have a salvage value of zero. Additionally, XYZ Corp expects that the new machine will increase its EBIT by $2000 in each of the next five years. Assuming that XYZ’s tax rate is 21% and the new machines WACC is 15%, what is the projects NPV. Round your final answer to two decimals.
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jeff jeffy answered 2 months agoRelated Solutions
XYZ corp. is considering investing in a new machine. The new machine cost will $10,000 installed....
XYZ corp. is considering investing in a new machine. The new
machine cost will $10,000 installed. Depreciation expense will be
$1000 per year for the next five years. At the end of the fifth
year XYZ expects to sell the machine for $6000. XYZ will also sell
its old equipment today that has a book value of $3000 for $3000.
In five years, the old machine will be fully depreciated and have a
salvage value of zero. Additionally, XYZ Corp...
XYZ corp. is considering investing in a new machine. The new machine cost will $10,000 installed....
XYZ corp. is considering investing in a new machine. The new
machine cost will $10,000 installed. Depreciation expense will be
$1000 per year for the next five years. At the end of the fifth
year XYZ expects to sell the machine for $6000. XYZ will also sell
its old equipment today that has a book value of $3000 for $3000.
In five years, the old machine will be fully depreciated and have a
salvage value of zero. Additionally, XYZ Corp...
XYZ corp. is considering investing in a new machine. The new machine cost will $ 8,000...
XYZ corp. is considering investing in a new machine. The new
machine cost will $ 8,000 installed. Depreciation expense on the
new machine will be $ 1,200 per year for the next five years. At
the end of the fifth year XYZ expects to sell the machine for
$3000. XYZ will also sell its old machine today that has a book
value of $4000 for $4000. The old machine has depreciation expense
of $800 per year and zero salvage value....
Company XYZ is considering investing in a new machine that will cost $15,000. The machine will...
Company XYZ is considering investing in a new machine that will
cost $15,000. The machine will allow the firm to generate sales of
$50,000 per year. The machine will have a life of 3 years. The
operating expenses of XYZ are projected to be 70% of total sales.
The machine will be depreciated on a straight-line basis to a zero
salvage value. The market value of the machine in three years is
estimated to be $5,000. The marginal tax rate...
XYZ Company is considering the purchase of a new machine. The machine will cost $200,000 and...
XYZ Company is considering the purchase of a new machine. The machine
will cost $200,000 and is expected to last 10 years. However, the
machine will need maintenance costing $25,000 at the end of year three
and at the end of year six. In addition, purchasing this machine would
require an immediate investment of $35,000 in working capital which
would be released for investment elsewhere at the end of the 10 years.
The machine is expected to have a $15,000...
Kingston Corp. is considering a new machine that requires an initial investment of $550,000 installed, and...
Kingston Corp. is considering a new machine that requires an
initial investment of $550,000 installed, and has a useful life of
8 years. The expected annual after-tax cash flows for the machine
are $89,000 during the first three years, $95,000 during years 4
through 6 and $105,000 during the last two years.
(1) Develop the timeline.
(2) Calculate the internal rate of return (IRR).
(3) Calculate the net present value (NPV) at the following
required rates of return: a. 3%,...
Tall Oaks Corp. is considering a new machine that requires an initial investment of $480,000 installed,...
Tall Oaks Corp. is considering a new machine that requires an
initial investment of $480,000 installed, and has a useful life of
8 years. The expected annual after-tax cash flows for the machine
are $89,000 for each of the 8 years and nothing thereafter. a.
Calculate the net present value of the machine if the required rate
of return is 11 percent. b. Calculate the IRR of this project. c.
Should Tall Oaks accept the project (assume that it is...
GDD are considering investing in a new manufacturing machine. The machine would cost £325,000 and have...
GDD are considering investing in a new manufacturing machine.
The machine would cost £325,000 and have a useful life of 10 years.
The residual value at the end of the 10 years would be £50,000.
Calculate the accounting value of the machine for each year of its
useful life, using both the straight-line and reducing-balance
methods of depreciation. Use a depreciation rate of 15% for the
reducing balance method.
Year
Straight-Line Method
value
Reducing-Balance Method
value
0
£325,000
£325,000
1...
XYZ is now evaluating the purchase of a new machine for $210,000 installed with no NWC...
XYZ is now evaluating the purchase of a new machine for $210,000
installed with no NWC change. They plan to sell the machine at the
end of 3 years for $30,000. MACRS 3 year depreciation. With the
more efficient machine, labor savings per year are expected to be
$70,000, $94,000 and $76,000 respectively. 40% tax. The cost of
capital for this project is 8.%
What is the discounted payback for this project?
a.
2.99 years
b.
2.52 years
c.
2.94...
XYZ is now evaluating the purchase of a new machine for $210,000 installed with no NWC...
XYZ is now evaluating the purchase of a new machine for $210,000
installed with no NWC change. They plan to sell the machine at the
end of 3 years for $30,000. MACRS 3 year depreciation. With the
more efficient machine, labor savings per year are expected to be
$70,000, $94,000 and $76,000 respectively. 40% tax. The cost of
capital for this project is 8.%. What is the IRR?
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