St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as orig can be used for quite a while longer. A new welder will cost $184,000 and have an estimated life of 8 years with no salvage value. The new welder will be much m however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $68,500 per year. The new machine will be depreciated over its recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20%, 11.52 %, 11.52 %, and 5.76%. The applicable corporate tax rate is 25%, and capital is 12%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest do if any, should be indicated by a minus sign.
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as orig can be used for quite a while longer. A new welder will cost $184,000 and have an estimated life of 8 years with no salvage value. The new welder will be much m however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $68,500 per year. The new machine will be depreciated over its recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20%, 11.52 %, 11.52 %, and 5.76%. The applicable corporate tax rate is 25%, and capital is 12%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest do if any, should be indicated by a minus sign.
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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Transcribed Image Text:St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed
can be used for quite a while longer. A new welder will cost $184,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient,
however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $68,500 per year. The new machine will be depreciated over its 5-year MACRS
recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost
capital is 12%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative va
if any, should be indicated by a minus sign.
$
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