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Part 1 Attempt 1/5 for 10 pts. What is the present value of all cash flows if a new server is bought once right now?

Part 1 Attempt 1/5 for 10 pts. What is the present value of all cash flows if a new server is bought once right now?

Essentials Of Investments
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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Problem 42 Intro Facebook runs many data warehouses full of servers. Assume that each existing server is 3 years old and was bought for $1,500. It could be sold for $600 now or for $300 in 2 years. The annual cost of running the server (for electricity, cooling and repairs) is $240. A new server costs $1,400 today and could be sold for $175 in 5 years. The annual cost of running it is $140. Both types of servers are usable for 5 years and are linearly depreciated to zero over 5 years. Facebook's marginal tax rate is 34% and the appropriate cost of capital for this project is 9%. Your task is to find out if Facebook should replace each server now or in two years. Part 1 Attempt 1/5 for 10 pts. What is the present value of all cash flows if a new server is bought once right now? 0+ decimals Submit Part 2 Attempt 1/5 for 10 pts. What is the present value of all cash flows if the old server is sold now, and the new server is bought now and then replaced every 5 years at the same terms? 0+ decimals Submit Part 3 Attempt 1/5 for 10 pts. What is the present value of all cash flows for the next 2 years if the old server is kept? 0+ decimals Submit Part 4 Attempt 1/5 for 10 pts. What is the present value of all cash flows if the server is first replaced in 2 years, and then every 5 years thereafter at the same terms? 0+ decimals Submit
Transcribed Image Text:Problem 42 Intro Facebook runs many data warehouses full of servers. Assume that each existing server is 3 years old and was bought for $1,500. It could be sold for $600 now or for $300 in 2 years. The annual cost of running the server (for electricity, cooling and repairs) is $240. A new server costs $1,400 today and could be sold for $175 in 5 years. The annual cost of running it is $140. Both types of servers are usable for 5 years and are linearly depreciated to zero over 5 years. Facebook's marginal tax rate is 34% and the appropriate cost of capital for this project is 9%. Your task is to find out if Facebook should replace each server now or in two years. Part 1 Attempt 1/5 for 10 pts. What is the present value of all cash flows if a new server is bought once right now? 0+ decimals Submit Part 2 Attempt 1/5 for 10 pts. What is the present value of all cash flows if the old server is sold now, and the new server is bought now and then replaced every 5 years at the same terms? 0+ decimals Submit Part 3 Attempt 1/5 for 10 pts. What is the present value of all cash flows for the next 2 years if the old server is kept? 0+ decimals Submit Part 4 Attempt 1/5 for 10 pts. What is the present value of all cash flows if the server is first replaced in 2 years, and then every 5 years thereafter at the same terms? 0+ decimals Submit
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