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 operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $253,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 38 percent. Assume the company uses straight-line depreciation.
Annual Cash flow and NPV IRR of new Machine is calculated in excel and screen shot provided below:
NPV of new machine is $545,887 and IRR is 11.36%.
Since, NPV of new machine is a positive value, so project should be accepted.
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 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 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 $6.7 million in...
A firm is considering an investment in a new machine with a price of $18.12 million to replace its existing machine. The current machine has a book value of $6.12 million and a market value of $4.62 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 $6.82 million in...
a firm is considering a an investment in a new macjine with a price of $17.1 million to replace its existing machine. The current machine has a book value of $6.7 million and a market value of $5.4 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 $6.95 million...
A firm is considering an investment in a new machine with a price of $16.4 million to replace its existing machine. The current machine has a book value of $6.1 million and a market value of $4.8 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 $6.65 million in...
A firm is considering an investment in a new machine with a price of $15.7 million to replace its existing machine. The current machine has a book value of $5.5 million and a market value of $4.2 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 $6.35 million in...
A firm is considering an investment in a new machine with a price of $18.15 million to replace its existing machine. The current machine has a book value of $6.15 million and a market value of $4.65 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 $6.85 million in...
A firm is considering an investment in a new machine with a price of $18.13 million to replace its existing machine. The current machine has a book value of $6.13 million and a market value of $4.63 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 $6.83 million in...
I need help with the third part, please. Problem 6-21 Calculating NPV and IRR for a Replacement A firm is considering an investment in a new machine with a price of $18.18 million to replace its existing machine. The current machine has a book value of $6.18 million and a market value of $4.68 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 company is considering investing in a new $ 8 million machine to replace the existing engine. Now the machine has a book value of $ 16 million and a market value of $ 14.5 million. The new engine is expected to have a life of four years, and the old engine has four years remaining in which it can be used. If the company replaces the old machine with a new one, they hope to save $ 16.7 million...
(15 pts) 8. Crowder Manufacturing, Inc. is considering the replacement of an existing machine. The new machine costs $750,000 and requires installation costs of $250,000. The existing machine can be sold currently for $300,000 before taxes. It is one year old, cost $600,000 new, and has a $500,000 book value and a remaining useful life of 5 years. Depreciation expense on the existing machine is $100,000 per year. Over its 5-year life, the new machine should reduce operating costs by...