com opnsidi) A company is considering replacing an existing machine with a more modern one. Here are some of the details: Old Machine $1,000,000 (7 years ago) $1,500,000 $200,000 $300,000 $0 (3 years from now) The tax rate is 40%. Assume straight-line depreciation and a RRR of 10%. Assume the salvage value of the investment is equal to zero when calculating the depreciation charge. O Find the NPV associated with the project New Machine Purchase Price $1,500,000 $1,500,000 $100,000 (10 years from now) Market Value Book Value Salvage Value 7 Age Original Life Yearly capacity Sales Price 10 10 55,000 units $7/unit 90,000 units $7/units Yearly expenses $100,000 $90,000 Training expenses Inventory not applicable $55,000 $30,000 $75,000
com opnsidi) A company is considering replacing an existing machine with a more modern one. Here are some of the details: Old Machine $1,000,000 (7 years ago) $1,500,000 $200,000 $300,000 $0 (3 years from now) The tax rate is 40%. Assume straight-line depreciation and a RRR of 10%. Assume the salvage value of the investment is equal to zero when calculating the depreciation charge. O Find the NPV associated with the project New Machine Purchase Price $1,500,000 $1,500,000 $100,000 (10 years from now) Market Value Book Value Salvage Value 7 Age Original Life Yearly capacity Sales Price 10 10 55,000 units $7/unit 90,000 units $7/units Yearly expenses $100,000 $90,000 Training expenses Inventory not applicable $55,000 $30,000 $75,000
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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Based on the information in the picture. WHat is the NPV associated with the project?
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