The supervisor of the
county Department of Transportation (DOT) is considering the
replacement of some machinery. This machinery has zero book value
but its current market value is $830. One possible alternative is
to invest in new machinery, which has a cost of $39,300. This new
machinery would produce estimated annual operating cash savings of
$12,650. The estimated useful life of the new machinery is four
years. The DOT uses straight-line depreciation. The new machinery
has an estimated salvage value of $2,030 at the end of four years.
The investment in the new machinery would require an additional
investment in working capital of $3,000, which would be recovered
after four years.
If the DOT accepts this investment proposal, disposal of the old
machinery and investment in the new equipment will take place on
December 31, 20x1. The cash flows from the investment will occur
during the calendar years 20x2 through 20x5.
Use Appendix A for your reference. (Use appropriate
factor(s) from the tables provided.)
Required:
Prepare a net-present-value analysis of the county DOT’s machinery replacement decision. The county has a 10 percent hurdle rate. (Round your "Discount factors" to 3 decimal places and final dollar amounts to whole dollars. Negative amounts should be indicated by a minus sign.)
Answer is given below
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery....
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $830. One possible alternative is to invest in new machinery, which has a cost of $39,300. This new machinery would produce estimated annual operating cash savings of $12,650. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $840. One possible alternative is to invest in new machinery, which has a cost of $39,400. This new machinery would produce estimated annual operating cash savings of $12,700. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $930. One possible alternative is to invest in new machinery, which has a cost of $40,300. This new machinery would produce estimated annual operating cash savings of $13,150. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value...
I am checking to see if I missing anything in this problem? Thank you! The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $960. One possible alternative is to invest in new machinery, which has a cost of $40,600. This new machinery would produce estimated annual operating cash savings of $13,300. The estimated useful life of the new machinery is four...
(DOT) is considering the replacement of some machinery. This machinery 3 annual operating cash savings of $13,150. The which would be recovered after four years December 31, 20x1. The cash flows from the investment will occur during the calendar years 20x2 through 20x5 (Use appropriate factorisj from the tabies provided Round your Discount factors" indiceted by e minus signj to 3 decimal places and final dollar amounts to whole dollars. Negative amounts should be
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