Question: Please show excel formulas ACME manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates

 Please show excel formulas ACME manufacturing is considering replacing an existing

production line with a new line that has a greater output capacity

Please show excel formulas

ACME manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost $1 million, have a five-year life, and be depreciated using MACRS over three years. At the end of five years, the new line could be sold as scrap for $200,000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a saving of $40,000 per year before tax and unadjusted for inflation (in today's dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $60,000 per year (in today's dollars). If ACME invests in the new line, a one-time investment of $10,000 in additional working capital will be required. The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of Inflation is 3 percent. Cash Flow Calculations for ACME Manufacturing Year ACME manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost $1 million, have a five-year life, and be depreciated using MACRS over three years. At the end of five years, the new line could be sold as scrap for $200,000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a saving of $40,000 per year before tax and unadjusted for inflation (in today's dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $60,000 per year (in today's dollars). If ACME invests in the new line, a one-time investment of $10,000 in additional working capital will be required. The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of Inflation is 3 percent. Cash Flow Calculations for ACME Manufacturing Year

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!