Original Machine Initial cost = 100,000 Annual depreciation = 9,000 Purchased 5 years ago Book Value =
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Question:
•Original Machine
–Initial cost = 100,000
–Annual depreciation = 9,000
–Purchased 5 years ago
–Book Value = 55,000
–Salvage today = 65,000
–Salvage in 5 years = 10,000
•New Machine
–Initial cost = 150,000
–5-year life
–Salvage in 5 years = 0
–Cost savings = 50,000 per year
–3-year MACRS depreciation
•Required return = 10%
•Tax rate = 40%
Based on this information calculate the cash flows generated by replacing the old machine with the new one and the IRR and NPV of doing so.
Expert Answer:
Cash Flows Analysis for Replacing Old Machine with New Machine Year Old Machine Cash Flows New Machi... View the full answer
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