Question: XYZ WANTS TO REPLACE OLD MACHINE WITH NEW MACHINE THAT COSTS 1,300,000 AND INSTALLATION OF 200,000. THE EXISTING MACHINE CAN BE SOLD FOR 190,000 DOLLAR
XYZ WANTS TO REPLACE OLD MACHINE WITH NEW MACHINE THAT COSTS 1,300,000 AND INSTALLATION OF 200,000. THE EXISTING MACHINE CAN BE SOLD FOR 190,000 DOLLAR THE OLD MACHINE COST WAS 800,000 AND IT HAS 3 YEARS USEFULL LIGE DEPRECIATED ACCORDING TO MACRS 33%,45%,15%, AND 5% THE OLD MACHINE IS 2 YEARS OLD. THE COMPANY WILL PAY 30,000 IN WORKING CAPITAL THE PROJECT HAS 3 YEARS LIFE SPAN AND THE NEW ONE CAN BE SOLD AT 500,000 DOLLAR AT THE END OF THE PROJECT. EBIT IS 720,000 DOLLAR EACH YEAR FOR 3 YEARS TAXES IS 40% DISCOUNT RATE IS 15% CALCULATE INITIAL INVESTMENT OPERATING CASH FLOW TERMINAL VALUE NPV
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