Homework Help is Here – Start Your Trial Now!
Business
Finance
1. Papa Stationery's current photocopy machine was purchased two years ago at RM50,000. The owner, Mr Karrem, is now considering buying a new machine that can make copies twice as fast as the existing machine. This new machine can be purchased for RM 80,000 and would be depreciated straight line over 8 years, after which it would have no salvage value. Mr Kareem expects that the new machine will produce EBITDA of RMS0,000 per year for the next eight years while the existing machine produces EBITDA of only RM35,000 per year. The current machine is being depreciated straight line over its useful life of 10 years after which it will have no salvage value. All other operating expenses are identical for both machines. The existing machine can be sold to another shop now for RM30,000. The Papa Stationery's tax rate is 35%. A. Papa Stationery elects to upgrade to the new machine by disposing the old machine, what is the incremental after-tax cash flow that will be incurred today (Year 0)? B. If Papa Stationery elects to upgrade to the new machine, what is the incremental after-tax cash flow that will be incurred in year 1?

1. Papa Stationery's current photocopy machine was purchased two years ago at RM50,000. The owner, Mr Karrem, is now considering buying a new machine that can make copies twice as fast as the existing machine. This new machine can be purchased for RM 80,000 and would be depreciated straight line over 8 years, after which it would have no salvage value. Mr Kareem expects that the new machine will produce EBITDA of RMS0,000 per year for the next eight years while the existing machine produces EBITDA of only RM35,000 per year. The current machine is being depreciated straight line over its useful life of 10 years after which it will have no salvage value. All other operating expenses are identical for both machines. The existing machine can be sold to another shop now for RM30,000. The Papa Stationery's tax rate is 35%. A. Papa Stationery elects to upgrade to the new machine by disposing the old machine, what is the incremental after-tax cash flow that will be incurred today (Year 0)? B. If Papa Stationery elects to upgrade to the new machine, what is the incremental after-tax cash flow that will be incurred in year 1?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Please Answer the subparts A&B... Im very needed  max 30-60 again thank u please answer....

1. Papa Stationery's current photocopy machine was purchased two years ago at RM50,000. The owner, Mr Karrem, is now considering buying a new machine that can make copies twice as fast as the existing a new machine. This new machine can be purchased for RM 80,000 and would be depreciated straight line over 8 years, after which it would have no salvage value. Mr Kareem expects that the new machine will produce EBITDA of RM50,000 per year for the next eight years while the existing machine produces EBITDA of only RM35,000 per year. The current machine is being depreciated straight line over its useful life of 10 years after which it will have no salvage value. All other operating expenses are identical for both machines. The existing machine can be sold to another shop now for RM30,000. The Papa Stationery's tax rate is 35%. A. Papa Stationery elects to upgrade to the new machine by disposing the old machine, what is the incremental after-tax cash flow that will be incurred today (Year 0)? B. If Papa Stationery elects to upgrade to the new machine, what is the incremental after-tax cash flow that will be incurred in year 1?
Transcribed Image Text:1. Papa Stationery's current photocopy machine was purchased two years ago at RM50,000. The owner, Mr Karrem, is now considering buying a new machine that can make copies twice as fast as the existing a new machine. This new machine can be purchased for RM 80,000 and would be depreciated straight line over 8 years, after which it would have no salvage value. Mr Kareem expects that the new machine will produce EBITDA of RM50,000 per year for the next eight years while the existing machine produces EBITDA of only RM35,000 per year. The current machine is being depreciated straight line over its useful life of 10 years after which it will have no salvage value. All other operating expenses are identical for both machines. The existing machine can be sold to another shop now for RM30,000. The Papa Stationery's tax rate is 35%. A. Papa Stationery elects to upgrade to the new machine by disposing the old machine, what is the incremental after-tax cash flow that will be incurred today (Year 0)? B. If Papa Stationery elects to upgrade to the new machine, what is the incremental after-tax cash flow that will be incurred in year 1?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Monitoring By the Board of Directors and Others
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS