company is considering replacing an existing machine with a more modem one. Here are some of the details:The tax rate is 40%. Assume straight-linedepreciation and a RRR of 10%. Assumethe salvage value of the investment isequal to zero when calculating theOld Machine$1,000,000 (7 years ago) $1,500,000$200,000$300,000S0 (3 years from now)New MachinePurchase Price$1,500,000$1,500,000$100,000 (10 years from now) depreciation charge. O Find the NPVMarket ValueBook ValueSalvage Valueassociated with the projectAgeOriginal LifeYearly capacity101055,000 unitsS7/unitS100,00090,000 units$7/unitsSales PriceYearly expenses$90,000Training expenses not applicableInventory$30,000$75,000$55,000

Net Present Value (NPV) is a type of capital budgeting technique that helps in evaluating various…

Answered: company is considering replacing an…

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

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A company is considering purchasing a new piece of equipment that costs $100,000 and has an estimated useful life of 5 years. The equipment should increase annual cash receipts by $80,000 per year. Cash expenses to operate the equipment should be $25,000. The company uses straight-line depreciation. If the after-tax cost of capital is 10% and the tax rate is (Round your 30%, the net present value of this project based on the tables in the appendix is $ answer to the nearest whole number.) Need help? Review these concept resources. Read About the Concept
Bartlett Car Wash Company is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $96,579 per year. Other information about this proposed project follows Initial investment $468,810 9 years Selvage value $ 47,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett Note: Round your percentage answer to 2 decimal places. 2. Calculate the payback period for Bartlett Note: Round your answer to 2 decimal places. 1. Accounting Rate of Retu 2. Payback Period years
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