Bramble 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 Determine which amounts listed are relevant cash flows for Bramble Corp, as it considers this asset sale and replacement Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows $12.900 $1,800 $1,800 $20,400 $2,100 NPV S 5 years $3,100 year for 5 years 342181 10% 20% Irrelevant V Inelevet V Relevant Relevant Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, ea 1.25124 and final answer to 2 decimal places eg 5,125.36. Enter negative amounts using either a negative sian preceding the number, eg-5,125.36 or parentheses, es (5,125,36) Click here to view the factor table 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
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Bramble 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
Determine which amounts listed are relevant cash flows for Bramble Corp, as it considers this asset sale and replacement
Estimated salvage value of new asset
Estimated annual net operating cash inflows
$12.900
$1,800
$1,800
$20,400
$2,100
NPV $
5
342181
$3,100
10%
20%
years
year for 5 years
Irelevant
Inelevet V
Relevant
Relevant V
Relevant V
Relevant
Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg 1.25124 and final answer to 2
decimal places eg 5,125.36. Enter negative amounts using either a negative sign preceding the number, eg-5,125.36 or parentheses, es
(5,125,36))
Click here to view the factor table
Transcribed Image Text:Bramble 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 Determine which amounts listed are relevant cash flows for Bramble Corp, as it considers this asset sale and replacement Estimated salvage value of new asset Estimated annual net operating cash inflows $12.900 $1,800 $1,800 $20,400 $2,100 NPV $ 5 342181 $3,100 10% 20% years year for 5 years Irelevant Inelevet V Relevant Relevant V Relevant V Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg 1.25124 and final answer to 2 decimal places eg 5,125.36. Enter negative amounts using either a negative sign preceding the number, eg-5,125.36 or parentheses, es (5,125,36)) Click here to view the factor table
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