Skysong Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset $11,400 Book value of old asset $2,000 Selling price of old asset $2,000 Purchase price of new replacement asset $19,900 Estimated salvage value of new asset $1,900 Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate 5 years $3,000/year for 5 years 11% Tax rate 20%

Skysong Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset $11,400 Book value of old asset $2,000 Selling price of old asset $2,000 Purchase price of new replacement asset $19,900 Estimated salvage value of new asset $1,900 Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate 5 years $3,000/year for 5 years 11% Tax rate 20%

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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Please answer net present value and profitability index:
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Citrus Enterprises is upgrading its fruit washing/separating machine. Citrus Enterprises has narrowed the decision down to two machines: Machine A and Machine B. Pertinent information about each machine includes:
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please detail solution and explnation
BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Machine A Machine B Original cost $ 77,500 $ 186,000 Estimated life 8 years 8 years Salvage value $ 19,500 $ 39,600 Estimated annual cash inflows $ 5,040 $ 9,800 Estimated annual cash outflows Click here to view the factor table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125 and profitability index to 2 decimal places, e.g. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be…
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