PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
15th Edition
ISBN: 9780137695621
Author: SMART
Publisher: PEARSON C
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Chapter 11, Problem 11.3P
Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects A and 8 These cash flows are summarized in the table below
| Project A | Project B | |
| Initial investment | –$4,650,000 | $1,550,000 |
| Year | Operating cash inflows | |
| 1 | $ 560,000 | $380,000 |
| 2 | 925,000 | 380,000 |
| 3 | 1,350,000 | 380,000 |
| 4 | 2,225,000 | 380,000 |
| 5 | 3,400,000 | 380,000 |
- a. If project A, which requires an initial investment of $4,650,000, is a replacement for project 8 and the $1,550,000 initial investment shown for project 8 is the after-tax
cash inflow expected from liquidating project 8, what would be the net cash flows for this replacement decision? - b. Instead, if project A is an expansion decision, what would be the net cash flows and how can it be viewed as a special form of a replacement decision? Explain.
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Chapter 11 Solutions
PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
Ch. 11.1 - Prob. 11.1RQCh. 11.1 - What three types of net cash flows may exist for a...Ch. 11.1 - Prob. 11.3RQCh. 11.1 - Prob. 11.4RQCh. 11.2 - Explain how to use each of the following inputs to...Ch. 11.2 - How do you calculate the book value of an asset?Ch. 11.2 - Prob. 11.7RQCh. 11.2 - Prob. 11.8RQCh. 11.3 - Prob. 11.9RQCh. 11.3 - Prob. 11.10RQ
Ch. 11.4 - Explain how the terminal cash flow is calculated...Ch. 11 - Book value, taxes, and initial investment Irvin...Ch. 11 - If Halley Industries reimburses employees who earn...Ch. 11 - Iridium Corp. has spent 3.5 billion over the past...Ch. 11 - Prob. 11.3WUECh. 11 - Prob. 11.4WUECh. 11 - Prob. 11.5WUECh. 11 - Prob. 11.1PCh. 11 - Net cash flow and time line depiction For each of...Ch. 11 - Replacement versus expansion cash flows Tesla...Ch. 11 - Sunk costs and opportunity costs Masters Golf...Ch. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Book value and taxes on sale of assets Troy...Ch. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Calculating initial investment Vastine Medical...Ch. 11 - Prob. 11.12PCh. 11 - Prob. 11.13PCh. 11 - Prob. 11.14PCh. 11 - Prob. 11.15PCh. 11 - Prob. 11.16PCh. 11 - Prob. 11.17PCh. 11 - Prob. 11.18PCh. 11 - Prob. 11.19PCh. 11 - Prob. 11.20PCh. 11 - Prob. 11.21PCh. 11 - Prob. 11.22PCh. 11 - Net cash flows for a marketing campaign Marcus...Ch. 11 - Net cash flows: No terminal value Central Laundry...Ch. 11 - Prob. 11.25PCh. 11 - Ethics Problem Cash flow projections are a central...
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