ZuoTi.Pro
Question

ABC Co. is considering replacing an old power generator with a new one. The old one...

ABC Co. is considering replacing an old power generator with a new one. The old one was purchased 5 years ago for $100,000. It is depreciated strait-line to zero over its 10-year life. It is expected to be worthless at the end of its 10-year life. If ABC sells it today, ABC should receive $65,000 for the generator. The new generator costs $150,000. It has a life of 5 years and will be depreciated strait-line to zero over its 5-year life. It is expected to be worthless at the end of its 5-year life. The new generator is expected to reduce the operating costs by $50,000 per year. There is no change in net working capital. The discount rate of this replacement project is 15%, and the tax rate is 40%.

What is the incremental operating cash flow for this project?

a. $50,000

b. $30,000

c. $32,000

d. $38,000

e. $18,000

What is the incremental net capital spending for this project?

a. $59,000

b. $150,000

c. $91,000

d. $85,000

e. $65,000

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASEprojects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File 740

AutoSum7 B a copy 2 Clear Sort & Find & Filter Select Editing Cells OM ON TE 316 740 projects (Autosaved) (Autosaved) (Autosa

0 0
Add a comment
Know the answer?
Add Answer to:
ABC Co. is considering replacing an old power generator with a new one. The old one...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Nikky Co. is considering replacing an old machine with a new one. The old one was...

    Nikky Co. is considering replacing an old machine with a new one. The old one was purchased 3 years ago for $200,000. It is depreciated straight-line to zero over its 10-year life. It is expected to be worth of 85,000 three years later. If Nikky sells it today, Nikky should receive $150,000 for the old machine. The new machine costs $300,000. It has a life of 5 years and will be depreciated straight-line to zero over its 5-year life. It...

  • You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated...

    You are is 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...

  • ABC Corp. is considering replacing one of its existing machines with a new, more automated and...

    ABC Corp. is considering replacing one of its existing machines with a new, more automated and efficient one. The old machine has a book value of $100,000. It could be sold today for $50,000. The remaining book value is being straight line depreciated to 0 salvage value, at the rate of $20,000/year. The new machine costs $400,000. If introduced, the company estimates that will save annually $60,000 on a before tax basis. This is considered a year end cash flow....

  • LoRusso Co. i considering replacing an existing piece of equipment. The project involves the following: The...

    LoRusso Co. i considering replacing an existing piece of equipment. The project involves the following: The new equipment will have a cost of $1,200,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t 0 The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year)...

  • please use excel to answer the questions and show all outputs E3) The Erley Equipment Company...

    please use excel to answer the questions and show all outputs E3) The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight line method toward a salvage value of $10,000, or by $9,000 per year. A new machine can be...

  • Suppose we are thinking about replacing an old computer with a new one. The old one...

    Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,960,000; the new one will cost, $2,531,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $660,000 after five years. The old computer is being depreciated at a rate of $472,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to...

  • Suppose we are thinking about replacing an old computer with a new one. The old one...

    Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,240,000; the new one will cost $1,500,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $240,000 after five years. The old computer is being depreciated at a rate of $248,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to...

  • The management of Mega Builders is considering replacing an old piece of equipment. The following information...

    The management of Mega Builders is considering replacing an old piece of equipment. The following information is provided : The equipment it wants to replace(old equipment) was purchased 5 years ago for $1.5m. It had a useful life of 15 years and the company applies straight-line depreciation with zero salvage value. The equipment’s current market value is $1.2m. If the company keeps using it, this piece of equipment will generate annual sales of $200,000 and incur annual cash operating expense...

  • Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being d...

    Co X is considering replacing one of its weaving machines with a new, more efficient machine. The old machine is being depreciated on a straight-line basis down to a salvage value of zero over the next 5 years. It has a book value of $200,000 and could be sold for $120,000. The replacement machine would cost $600,000 and have an expected life of 5 years, after which it could be sold for $100,000. Because of reductions in defects and material...

  • Please solve thanks Q4) Your corporation is considering replacing older equipment. The old machine is fully...

    Please solve thanks Q4) Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $69,818.00 seven years ago. The old equipment currently has no market value. The new equipment cost $50,217.00. The new equipment will be depreciated to zero using straight-line depreciation for the four- year life of the project. At the end of the project the equipment is expected to have a salvage value of $36,150.00. The new equipment is expected to save the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT