Ned Tech Corporation is considering replacing one of its machines with a more efficient one. The old machine has a book value of $60,000 and a remaining useful life of 5 years. It can sell the old machine now for $ 265,000. The old machine is being depreciated by 120,000 per year straight line. The new machine has a purchase price of $ 1,175,000, an estimated useful life, five years of MACRS class life, and a salvage value of $145,000. Annual economic savings is $255,000 if the new machine is installed. Taxes are 21%, and WACC is 12. The depreciation Table for MACS is on page 176, Table 3. a. Calculate the NPV and IRR of the project and decide whether to accept or reject the project and why? b. What is the importance of cash flow to a company.
Ned Tech Corporation is considering replacing one of its machines with a more efficient one. The old machine has a book value of $60,000 and a remaining useful life of 5 years. It can sell the old machine now for $ 265,000. The old machine is being
a. Calculate the NPV and
b. What is the importance of cash flow to a company.
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