Question: can you please help me with this ? - The new plece of equipment will have a cost of $2,400,000, and it will be depreciated

- The new plece of equipment will have a cost of $2,400,000, and it will be depreciated on a straight-line basis over a period of five years. - The old machine is also beino deprecated on a straight.line basis. It has a book value of $200,000 (at year 0 ) and three more years of deprediation loft ( $50,000 per year). - The new equipment will have a salvage value of $0 at the end of the prolect's life (rear 5 ). The old machine has a current salvage value (at year o) of $300,000. - Peplacing the old machine will require an inveatment in net working capital (NwC) of $60,000 that will be recovered at the end of the project's life (year 5 ). - The new machine is more efficient, so the incremental increase in operating income before taxes will increase by a total of $300,000 in each of the next five years (years 1-5). (Hint: This value represents the difference between the revenues and operating costs. (including depreciation expense) generated usino the new equipment and that earned using the old equipment.) - The project's required rate of return is 11%. - The company's annual tax rate is 30%. Complete the following table and compute the incremental cash flows assocated with the replacement of the old equpment with the new equipment. The net sresent value (NPV) of this replacoment project is
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
