in case that the new machinery have a remaining market value of 50000euros, calculate the Net Present
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The company United Metal Transport Co. (UMT) is considering to replace its old machinery which is used to the production of metallic transport units. The new machinery is expected to improve the durability of the metal components. A marketing study suggested that the improved durability of the metal components will allow the sale of each unit at an increased price by 0.30€ than the units produced by the old machinery (the current price is 7.50€ per unit). Sales are expected to increase from 160,000 to 176,000 units per year. The new machinery will cost 280,000€ and will have 17,000€ annual operating expenses. Raw materials, selling, general and administrative expenses will continue at €7 per unit. The new machinery will have as a result an increase of working capital by 40,000€ in year 0 which will be retrieved in the end of the useful life of the project. The new machinery will have a useful life of 7 years. It will be depreciated for tax purposes with the straight-line depreciation method (meaning the same amount is expensed in each period over the asset's useful life) with the assumption that there is no residual/salvage value. The tax rate is 34% and the discount rate (cost of capital) is 16%. Using this information. you are required to: The company United Metal Transport Co. (UMT) is considering to replace its old machinery which is used to the production of metallic transport units. The new machinery is expected to improve the durability of the metal components. A marketing study suggested that the improved durability of the metal components will allow the sale of each unit at an increased price by 0.30€ than the units produced by the old machinery (the current price is 7.50€ per unit). Sales are expected to increase from 160,000 to 176,000 units per year. The new machinery will cost 280,000€ and will have 17,000€ annual operating expenses. Raw materials, selling, general and administrative expenses will continue at €7 per unit. The new machinery will have as a result an increase of working capital by 40,000€ in year 0 which will be retrieved in the end of the useful life of the project. The new machinery will have a useful life of 7 years. It will be depreciated for tax purposes with the straight-line depreciation method (meaning the same amount is expensed in each period over the asset's useful life) with the assumption that there is no residual/salvage value. The tax rate is 34% and the discount rate (cost of capital) is 16%. Using this information. you are required to:
Expert Answer:
Answer rating: 100% (QA)
PART 1 PRESENT VALUE OF COSTS cost of machine 280000 present value of operating expenses ... View the full answer
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date:
Students also viewed these finance questions
-
The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment costs $10 million and the company expects to sell its old equipment for $1...
-
Pilot Plus Pens is deciding when to replace its old machine. The machines current salvage value is $2.2 million. Its current book value is $1.4 million. If not sold, the old machine will require...
-
Pilot Plus Pens is deciding when to replace its old machine. The machines current salvage value is $1.8 million. Its current book value is $1.1 million. If not sold, the old machine will require...
-
1. Because triangle A is congruent with triangle B, and triangle A is isosceles, it follows that triangle B is isosceles. 2. The plaque on the Leaning Tower of Pisa says that Galileo performed...
-
List and describe some of the banking services offered by financial institutions.
-
Terrace Board Rentals was started on January 1, 2022, by Ryan Terrace with an investment of $50,000 cash. The company rents out snowboards and related gear from a small store. During the first 11...
-
1. In 1944, W. E. Collins conveyed land to the Church of God of Prophecy. The deed said: "This deed is made with the full understanding that should the property fail to be used for the Church of God,...
-
Morse Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2012...
-
! Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below] A manufacturer reports the following for two...
-
Finney Company's condensed income statement is presented below: The following data is compiled relative to Finney's operating segments: Included in the amounts allocated to each segment on the above...
-
how do you do part 4 with regards to the sea star company that asks whether operating income is higher or lower using absorption or variable costing? Also, how do you find the difference between each?
-
Required information [The following information applies to the questions displayed below.] AirPro Corporation reports the following for this period. Actual total overhead Standard overhead applied...
-
Calculate the cost per annum for each of the on-costs for each type of employee. Round your figures up to the nearest whole dollar. Complete the shaded fields Actual payroll cost $ Super 9.5% $...
-
Cash receipt from sale of equipment $ 17,000 Depreciation expense 13,000 Cash payment of dividends 5,800 Cash receipt from issuance of common stock 20,000 Net income 38,000 Cash purchase of land...
-
Complete the performance report. Review the existing data in the performance report. Calculate the variances. Calculate the variance percentages. Decide whether the variances are favourable or...
-
QUESTION 30 Look at the graph below. Find the range of f. OA. (-0,6) B. (6,00) C. (-, ) D. (00,-6) QUESTION 31 Look at the graph below. Evaluate f (-1). A. 3 B. 1 OC.-6.2 and 4 D. 6 QUESTION 32 Look...
-
Explain what is meant by vicarious liability and when it is available?
-
Phillips Screwdriver Company has borrowed $20 million from a bank at a floating interest rate of 2 percentage points above three-month Treasury bills, which now yield 5 percent. Assume that interest...
-
Marsha Jones, whom you met in the Chapter Mini-case, has bought a used Mercedes horse transporter for her Connecticut estate. It cost $35,000. The object is to save on horse transporter rentals....
-
Table 6.8 shows investment and projected income in euros for Flanel's new perfume factory. Forecast cash flows and calculate NPV. The nominal cost of capital in euros is 11 percent. 2 3 6. 1. Capital...
-
What are G.E. Moulton's fraud identifiers?
-
Give the percentages when CEOs and CFOs are involved in fraudulent financial fraud cases.
-
What was the pressure on Tracey Henderson, an executive of the Australia Football League, to steal?
Study smarter with the SolutionInn App