Question
In: Finance
The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called...
The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called an X-tender, would provide better sundaes, but it costs $120,000. The X-tender requires $20,000 in additional net working capital, which will be recouped at the end of the project. The machine’s useful life is 10 years, after which it can be sold for a salvage value of $40,000. Straight-line depreciation will be used and the machine will be depreciated to zero over the 10-year project. The tax rate is 45% and the required return is 16%. The machine is expected to increase “sales minus costs” by $35,000 per year.
1) What are NPV, PI, Payback Period, Discounted Payback Period, and IRR?
Please show all the steps carefully with explanation. Thank You.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called...
The Canton Sundae Corporation is considering the replacement of
an existing machine. The new machine, called an X-tender, would
provide better sundaes, but it costs $120,000. The X-tender
requires $20,000 in additional net working capital, which will be
recouped at the end of the project. The machine’s useful life is 10
years, after which it can be sold for a salvage value of $40,000.
Straight-line depreciation will be used and the machine will be
depreciated to zero over the 10-year...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the
replacement of an existing machine. The new machine costs $1.8
million and requires installation costs of $250,000. The existing
machine can be sold currently for $125,000 before taxes. The
existing machine is 3 years old, cost $1 million when purchased,
and has a $290,000 book value and a remaining useful life of 5
years. It was being depreciated under MACRS using a 5-year recovery
period. If it is held for 5 more years, the machine’s...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine's...
X Company is considering the replacement of an existing machine. The new machine costs $1.8 million...
X Company is considering the replacement of an existing machine.
The new machine costs $1.8 million and requires installation costs
of $250,000. The existing machine can be sold currently for
$125,000 before taxes. The existing machine is 3 years old, cost $1
million when purchased, and has a $290,000 book value and a
remaining useful life of 5 years. It was being depreciated under
MACRS using a 5-year recovery period. If it is held for 5 more
years, the machine’s...
Integrativelong dash—Investment decision Holliday Manufacturing is considering the replacement of an existing machine. The new machine...
Integrativelong dash—Investment decision
Holliday Manufacturing is considering the replacement of an
existing machine. The new machine costs $1.18 million and requires
installation costs of $159,000.The existing machine can be sold
currently for $186,000 before taxes. It is 2 years old, cost
$803,000 new, and has a $385,440 book value and a remaining useful
life of 5 years. It was being depreciated under MACRS using a
5-year recovery period and therefore has the final 4 years of
depreciation remaining. If it...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
A firm is considering the replacement of its existing machine with new automated machinery costing $850,000....
A firm is considering the replacement of its existing machine
with new automated machinery costing $850,000. The new machine will
lead to an increase in cash sales of $280,000 p.a. Annual interest
expense will increase from $15,000 to $25,000.
Annual cash operating expenses are currently $300,000 and will
decrease by $60,000 with the new machine. The new machine has a
five-year life for tax purposes and for internal management
accounting the firm assumes all non-current assets have a ten-year
tax...
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