The Darlington Equipment Company purchased a machine 5 years ago, prior to the TCJA, at a cost of $95,000. The machine had an expected life of 10 years atthe time of purchase, and it is being depreciated by the straight-line method by $9,500 per year. If the machine is not replaced, it can be sold for $10,000 atthe end of its useful life.A new machine can be purchased for $180,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $40,000 per year.Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonusdepreciation at the time of purchase.The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%.a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should beindicated by a minus sign. Round your answer to the nearest dollar.-135,000$b. What are the incremental cash flows that will occur at the end of Years 1 through 5? Round your answers to the nearest dollar.Year 1Year 2Year 3Year 4Year 530,50030,500$$Should Darlington replace the old machine?Yes$30,500$30,500$c. What is the NPV of this project? Do not round intermediate calculations. Round your answer to the nearest cent.$-16,365.6430,500

After tax salvage value is calculated as shown below.

Answered: he Darlington Equipment Company…

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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