Suppose that the BMW Plant in Spartanburg, SC decides to replace a major assembly line on...

 

Transcribed Image Text:

Suppose that the BMW Plant in Spartanburg, SC decides to replace a major assembly line on the plant floor. The current assembly line has a book value of $400,000, and the firm can sell it to another manufacturer for $180,000. The new assembly line will cost BMW $4,000,000 to purchase, and there will be an additional $200,000 cost to deliver and install the asset. Finally, as part of the new assembly line, BMW will increase net working capital (NWC) by $125,000 today (year 0). The marginal tax rate facing BMW is 30%. What is the cash flow from replacing the old assembly line? (Include all costs....) Suppose that the BMW Plant in Spartanburg, SC decides to replace a major assembly line on the plant floor. The current assembly line has a book value of $400,000, and the firm can sell it to another manufacturer for $180,000. The new assembly line will cost BMW $4,000,000 to purchase, and there will be an additional $200,000 cost to deliver and install the asset. Finally, as part of the new assembly line, BMW will increase net working capital (NWC) by $125,000 today (year 0). The marginal tax rate facing BMW is 30%. What is the cash flow from replacing the old assembly line? (Include all costs....)

Answer rating: 100% (QA)

To calculate the cash flow from replacing the old assembly line we need to consider the initial inve... View the full answer