Blossom Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate Cost of old asset Book value of old asset Selling price of old asset Determine which amounts listed are relevant cash flows for Blossom Corp. as it considers this asset sale and replacement. Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows $12,400 $2,000 $2,000 $19,200 $2,200 Click here to view the factor table 5 years $2,800/year for 5 years NPV $ 9% 20% Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g. (5,125.36).) Relevant
Blossom Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate Cost of old asset Book value of old asset Selling price of old asset Determine which amounts listed are relevant cash flows for Blossom Corp. as it considers this asset sale and replacement. Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows $12,400 $2,000 $2,000 $19,200 $2,200 Click here to view the factor table 5 years $2,800/year for 5 years NPV $ 9% 20% Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g. (5,125.36).) Relevant
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
Related questions
Question
A 118.
Transcribed Image Text:Current Attempt in Progress
Blossom Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be
relevant to this analysis.
Cost of old asset
Book value of old asset
Selling price of old asset
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated useful life of new asset
Estimated annual net operating cash inflows
Discount rate
Tax rate
Cost of old asset
Book value of old asset
Selling price of old asset
Purchase price of new replacement asset
Estimated salvage value of new asset
Determine which amounts listed are relevant cash flows for Blossom Corp. as it considers this asset sale and replacement.
Estimated annual net operating cash inflows
$12,400
$2,000
$2,000
$19,200
$2,200
Click here to view the factor table
5 years
NPV $
$2,800
9%
20%
Relevant
/year for 5 years
Relevant
Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2
decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g.
(5,125.36).)
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