Vaughn Corp. is planning to replace an old asset with new equipment that will operate more...

  
  

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Vaughn Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $13,200 $1,900 $1,900 $20,500 $2.000 5 $3,100 8% 20% years year for 5 years Determine which amounts listed are relevant cash flows for Vaughn Corp. as it considers this asset sale and replacement. Determine which amounts listed are relevant cash flows for Vaughn Corp. as it considers this asset sale and replacement. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows Irrelevant v Irrelevant Relevant Relevant Relevant Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g (5,125.36).) Vaughn Corp. is planning to replace an old asset with new equipment that will operate more efficiently. The following amounts may be relevant to this analysis. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated useful life of new asset Estimated annual net operating cash inflows Discount rate Tax rate $13,200 $1,900 $1,900 $20,500 $2.000 5 $3,100 8% 20% years year for 5 years Determine which amounts listed are relevant cash flows for Vaughn Corp. as it considers this asset sale and replacement. Determine which amounts listed are relevant cash flows for Vaughn Corp. as it considers this asset sale and replacement. Cost of old asset Book value of old asset Selling price of old asset Purchase price of new replacement asset Estimated salvage value of new asset Estimated annual net operating cash inflows Irrelevant v Irrelevant Relevant Relevant Relevant Relevant Then, find the NPV of the new investment. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number, e.g. -5,125.36 or parentheses, e.g (5,125.36).)

Answer rating: 100% (QA)

The relevant cash flows for Vaughn Corp are as follows Selling price of the old asset Relevant 1900 ... View the full answer