eBook The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66495e1f463a2_25466495e1e8533f.jpg)
Transcribed Image Text:
eBook The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $800. Dauten's marginal federal-plus- state tax rate is 25%, and its WACC is 11%. What is the NPV of the incremental cash flow stream? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent. $ 1103 Should the company replace the old machine? Yes eBook The Dauten Toy Corporation currently uses an injection molding machine that was purchased prior to the new tax legislation. This machine is being depreciated on a straight-line basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be sold for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per year. If the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $10,000, an estimated useful life of 6 years, and an estimated salvage value of $800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permit an output expansion, so sales would rise by $800 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $800. Dauten's marginal federal-plus- state tax rate is 25%, and its WACC is 11%. What is the NPV of the incremental cash flow stream? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent. $ 1103 Should the company replace the old machine? Yes
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
At t = 0, a particle is traveling parallel to very large insulating plate at a 0.360 m distance with a speed of 980 m/s. Consider that the insulating plate has uniform surface charge density 2.34. x...
-
Calculate the number-average molecular weight of a random nitrile rubber [poly(acrylonitrile-butadiene) copolymer] in which the fraction of butadiene repeat units is 0.30; assume that this...
-
Perception is based on __________. a. current events b. attitudes c. prior experience d. archival data
-
Edson Manufacturing Company purchased 100 percent of the common stock of Liverpool Manufacturing Company for $600,000. Liverpools stockholders equity included common stock of $400,000 and retained...
-
ERP software programs allow tighter linkages within a supply chain than were possible with earlier generations of software. Consider the possibility of a tighter link between the marketing and...
-
Find the linear approximation for f(x) = vx about a = 10 L( x ) = Use your answer to estimate the given number. V 99.8
-
Answer the below questions. (a) Assume that the swap rate for an interest-rate swap is 7% and that the fixed-rate swap payments are made quarterly on an actual / 360 basis. If the notional amount of...
-
TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produced 68,000 units last year: (Click the icon to view...
-
Kiddie World uses a periodic inventory system and the retail inventory method to estimate ending inventory and cost of goods sold. The following data are available at the end of the year: Beginning...
-
In working on a bid project, you have determined that $318,000 of fixed assets are required. These assets will be depreciated straight-line to zero over the 6-year life of the project. Ignore bonus...
-
How do advanced structural health monitoring techniques, such as distributed fiber optic sensing and wireless sensor networks, enhance the safety and performance assessment of bridges and other...
-
Two Na + ions are 3 . 6 nm apart. At 2 0 C what is the magnitude of the electric force between the ions if they are in seawater in which the positive and negative ions each have a concentration of 5...
-
Philippines Peso (the currency of Philippines) 1) Provide a plan of action that could be implemented to mitigate the impact of the currency movements, i.e., how you should to some firm approach...
-
BADABUM INC. has no debt outstanding and a total market value of $500,000. Earnings before interest and taxes, EBIT, are projected to be $50,000. Money is considering a $200,000 debt issue with an 10...
-
The following processes constitute the air-standard Diesel cycle: 12: isentropic compression,23: constant-volume energy addition (T and P increase),34: constant-pressure energy addition (v...
-
Define a business transaction in the broad sense and give examples of the two different kinds of transactions.
-
What two equalities in accounting must be maintained in transaction analysis?
-
What is a T-account? What is its purpose?
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App