ZuoTi.Pro
Question

Number 2

Crane Manufacturing management is considering overhauling their existing line, which currently has both a book value and a salvage value of $0. It would cost $400,000 to overhaul the existing line, but this expenditure would extend its useful life to five years. The line would have a $0 salvage value at the end of five years. The overhaul outlay would be capitalized and depreciated using MACRS over three years. The tax rate is 35 percent, the opportunity cost of capital is 14 percent. The NPV of the new production line is $-357,000.  NPW of renovating old line?


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

Homework Answers

Request Professional Answer

Request Answer!

We need at least 9 more requests to produce the answer.

1 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Number 2
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

Similar Homework Help Questions

  • what is the payback period , net present Value, Initial rate of return , and MIRR for both machines Question 2...

    what is the payback period , net present Value, Initial rate of return , and MIRR for both machines Question 2 Staten Island Construction Company is considering replacing an existing crane with one of two newer more effective models. The existing crane is 3 years old, cost $32,000 and is being depreciated under MACRS using a 5-year recovery period. Although the existing crane has only three years of depreciation remaining under MACRS, it has a remaining usable life of 5...

  • Ne with one of two newer more effective models. The existing crane is 3 years old, cost $32.000 a...

    ne with one of two newer more effective models. The existing crane is 3 years old, cost $32.000 and is being depreciated under MACRS using a 5-year recovery period. Although the existing crane has only three years (years 4, 5, and 6) of depreciation remaining under MACRS, it has a remaining usable life of 5 years. Crane A, one of two newer models cost $40,000 to purchase, and $8,000 to install. It has a 5- and will be depreciated under...

  • Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will...

    Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $4,800 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...

  • Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,...

    Crane Lumber, Inc., is considering purchasing a new wood saw that costs $55,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,300 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...

  • A small factory is considering replacing its existing coining press with a newer, more efficient one....

    A small factory is considering replacing its existing coining press with a newer, more efficient one. The existing press was purchased five years ago at a cost of $200,000, and it is being depreciated according to a 7-year MACRs depreciation schedule and the first five years of depreciation have been taken (see below for MACRs chart). The CFO estimates that the existing press has 6 years of useful life remaining. The purchase price for the new press is $306,000. The...

  • Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will...

    Crane Lumber, Inc., is considering purchasing a new wood saw that costs $65,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,000 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane's tax...

  • Crane Lumber, Inc., is considering purchasing a new wood saw that costs $50,000. The saw will...

    Crane Lumber, Inc., is considering purchasing a new wood saw that costs $50,000. The saw will generate revenues of $100,000 per year for five years. The cost of materials and labor needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $3,100 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Crane’s tax...

  • Bottoms Up Diaper Service is considering the purchase of a new industrial washer, It can Durchase...

    Bottoms Up Diaper Service is considering the purchase of a new industrial washer, It can Durchase the washer for $1.800 and sell its old washer for $600. The new washer will last for 6 vears and save $500 a year in expenses. The opportunity cost of capital is 19% , and the firm's tax rate is 40% a. If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life. what is the annual operating...

  • 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...

  • 1. Exercise 17.1 A firm has the opportunity to invest in a project having an initial...

    1. Exercise 17.1 A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firm’s cost of capital is 12 percent. a) What is the internal rate of return (IRR) for the project? ( Answer-------------)(Hint:...

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