Current Aftempt in Progress

Filst$-$Rate Cleaners is considering replacing one of its tired cleaning machines for a new model that can dry$-$clean clothes in half the time of the old machline. Both the book value and the salvage value of the current machine are $$2,500$; the current machine would be sold if the new machine is punchased. The new machine would cost $$20,000$ and is expected to last $15$ years, at which point it would be sold for its salvage value or $$2,000.$ it would generate additional net operating cash flows of $$4,500$ each year of its usefullife. FirstRate Cleaners estimates its tax rate to be $25\%,$ while its required rate of return $158\%.$

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$($a$)$

Your answer is correct.

Outline the appropriate cash flows$-$including the depreciation tax shield, timing, adjustment for taxes, and appropriate PV factor for each component of this equipment$-$replacement scenario. $($Round present value foctor answers to $5$ decimol places, eg$.1\mathrm{.}25124.$ Round tax rote and present value to $2$ decinnal ploces, es$.0\mathrm{.}15$ or $15\mathrm{.}25.$ Enter negotive amounts using either a negathe sign preceding the number, es$,45$ or parentheses, es: $(45))$

$($b$1)$

Your Answer Correct Answer $($Used$)$

Calculate the NPV of this potential investment. $($Round present walue factor colculations to $5$ declmal places, e$8.1\mathrm{.}25124$ and final answer to $2$ dedimal places eg$,5,125\mathrm{.}36.$ Enter negathve amounts using either a negative sign preceding the number, eg$,-5,125,36$ or parentheses, eg$.(5,125\mathrm{.}36))$

$NPV,$$

Should First$-$Rate Cleaners purchase this new asset?

$($c$)$

Your answer is incorrect.

Would your answer to part $($b$)$ change if First$-$Rate requires a return of $12\%?($Round present value factor calculations to $5$ decimal places, eg $1\mathrm{.}25124$ and final answer to $2$ decimal placeseg. $5,125\mathrm{.}36.$ Enter negative amounts using elther a negathe sign precedins the number, eg $-5,125\mathrm{.}36$ or parentheses, e$.(5,125\mathrm{.}36)).$

NPY $

The answer change.

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