Question
In: Finance
You are considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated using...
You are considering replacing a five-year-old machine that
originally cost $50,000. It was being depreciated using
straight-line to an expected salvage value of zero over its
original 10-year life and could now be sold for $40,000. The
replacement machine would cost $190,000 and have a five-year
expected life. It would be depreciated using the MACRS 5-year class
life. The actual expected salvage value of this machine after five
years is $20,000. The new machine is expected to operate much more
efficiently, saving $6,000 per year in energy costs. In addition,
it will eliminate one salaried position saving another $54,000
annually. The firm’s marginal tax rate is 35% and the WACC is
7.5%.
a. Set up an operating cash flow statement, and
calculate the payback, discounted payback, NPV, IRR, and MIRR of
the replacement project. Should the project be accepted?
*Use excel cell reference and display the formulas
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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You are is considering replacing a five-year-old machine that
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