Tamarisk 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 Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $12,000 $2,000 $2,000 $18,800 $2,200 5 years $2,700 /year for 5 years 11% 20%
Tamarisk 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 Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $12,000 $2,000 $2,000 $18,800 $2,200 5 years $2,700 /year for 5 years 11% 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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Transcribed Image Text:Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2
decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g.
(5,125.36).)
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NPV $
Transcribed Image Text:Tamarisk 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
Book value of old asset
Selling price of old asset
Purchase price of new replacement asset
Estimated salvage value of new asset
Estimated useful life of new asset
Estimated annual net operating cash inflows
Discount rate
Tax rate
$12,000
$2,000
$2,000
$18,800
$2,200
5 years
$2,700
11%
20%
/year for 5 years
Determine which amounts listed are relevant cash flows for Tamarisk Corp. as it considers this asset sale and replacement.
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