Question: Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1740,000; the new one will cost, $2,105,000.

 Suppose we are thinking about replacing an old computer with a

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1740,000; the new one will cost, $2,105,000. The new machine will be depreciated stralght-line to zero over its five-year Iife. It will probably be worth about $495,000 after five years The old computer Is belng depreciated at a rate of $384,000 per year. It will be completely wrtten off in three years. If we don't replace It now, we will have to replace it In two years. We can sell it now for $585,000; In two years, It will probably be worth $171,000. The new machine wll save us $365,000 per year In operating costs. The tax rate Is 24 percent, and the discount rate is 9 percent a-1 Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g. 32.16) a-2 What is the NPV of the decislon to replace the computer now? (A negative answer should be Indicated by a minus slgn. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g, 3216.) a-1. Old computer EAC New computer EAC a-2. NPV 211,475.39 -100,312 47 18.179.00

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