A firm is considering an investment in a new machine with a price of $11.5 million to replace its existing
a. What is the NPV and IRR of the decision to replace the old machine?
b. Ignoring the time value of money, the new machine saves only $10 million over the next four years and has a cost of $11.5 million. How is it possible that the decision to replace the old machine has a positive NPV?
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Question Posted: October 01, 2015 07:05:31