Question: The Western Company is using a computer whose origine was $30,000. The machine is now five years old and has a current market value of

 The Western Company is using a computer whose origine was $30,000.

The Western Company is using a computer whose origine was $30,000. The machine is now five years old and has a current market value of $10,000. The computer is being depreciated on a straight-line basis over a 10-year life ed salvage value. Its market value at that time is estimated to also be zero. Management is contemplating the purchase of a new computer whose cost is $65,000 and whose estimated salvage value is 15,000. Expected savings from the new computer are $18,000 a year, and it will raise sales by $9,000 a year. The market value of the new computer in five years is estimated to be $20,000. Deprecaition is on a straight-line basis over a 5- year life. No changes in net working capital will be necessary to proceed with this replacement project. The cost of capital is 15 percent. The tax rate is 40 percent. A.) Calculate the Initial Investment requirement for this replacement project. (I = ?) B.) Calculate the change in depreciation expense that would occur as a result of proceeding with this project. (ADept = ? t = 1,2,...,5) c.) Calculate AOCF, t = 1,2, ...,5. D.) Calculate ANOCF, t = 1,2,...,5. E.) Calculate the project's NPV, IRR, and PI and decide if the project should be accepted or rejected

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