Question: You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 Million, but will be more

You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 Million, but will be more efficient than the old machine, reducing costs by $500,000 per year. Your old machine is fully depreciated, but you could sell it for $50,000. You would depreciate the new machine over a 3 year life using MACRS, the new machine will not change your working capital needs. Your tax rate is 35%, and your cost capital is 9% (Note: the depreciation rare of 3 year life for MACRS: 33.33, 44.45, 14.81, 7.41)

A) What is the salvage value of the old machine?

B) What are are the incremental cash flows for the replacement? (Please construct a table to show the calculation)

C) Should you replace the machine?

Step by Step Solution

★★★★★

3.47 Rating (154 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

A The salvage value of the old machine is 50000 This is the amount of money you would receive from s... View full answer

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!

what ways can environmental scanning techniques and trend analysis frameworks be leveraged to anticipate emergent challenges and opportunities, informing the strategic direction and priorities...

Define the SNMP model. How many tiers of agent-manager architecture it might have? How does the SNMP model employ client-server functionality? Is the peer-to-peer SNMP model feasible?

You are trying to decide whether to continue renting an apartment or to buy a house. In 20 years, you plan on leaving Canada and moving to a warm tropical island and would like to have as much money...

You are trying to decide whether to replace a machine on your production line. The new machine will cost $1,000,000, but will be more efficient than the old machine, reducing costs by $400,000 per...

3. (20%) You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 million, but will be more efficient than the old machine, reducing costs by $0.5...

You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 Million, but will be more efficient than the old machine, reducing costs by $500,000 per...

You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 million, but will be more efficient than the old machine, reducing costs by $500,000 per...

You are trying to decide whether to replace a machine on your production line. The new machine will cost SI million, but will be more efficient than the old machine, reducing costs by S500,000 per...

You are trying to decide whether to replace a machine on your production line. The new machine will cost $5 million, but will be more efficient than the old machine, reducing costs by $1,500,000 per...

You are trying to decide whether to replace a machine on your production line. The new machine will cost $1 million, but will be more efficient than the old machine, reducing costs by $500,000 per...

A property-casualty insurance company has estimated the following required charges for its various risk classes (in millions): a. What is the RBC charge as per the model recommended by the NAIC? b....

In Exercises 45 and 46, use Theorem 4. 6 to find all values of k for which A is invertible 1. 2. k -k31 1 k -8 k 1 0kk k2k

Find the circulation and flux of the feld F = 4 x 2 | 4 y 2 | around and across the closed semicircular path that consists of the semicircular arch cos the sin n ) , 0 1 , followed by the line...

Refer to the information for Solpoder Corporation. Required: 1.Prepare a statement of cash flows using the direct method. Solpoder corporation Comparative Balance Sheets At December 31, 2015 and 2016...

Use the Mean Value Theorem to show that In r 1. Determine the absolute maximum and minimum of f(r) - r-12.-1 on the interval |-3,1). Justify your answer.

Vedantu Q5. The number of all possible positive integral value of a for which the roots of the quadratic equation, 6x - 11x + a = 0 are rational numbers is : JEE-Main 2019, 9th Jan -II A 2 5 D 4...

Calculate the oxidation state of the underlined element of the following compounds 1. CO2 2. SO, 16. RbO, 17. , 18. NH,OH 19. N,H, 3. SO, 4. CH, 5. NH, 6. MnO, 7. CrCl, 8. H,SO, 9. ., 10. NaHCO3 20....

15 In the equation; Cr,0 + Fe + H -Cr* + Fe* + H;0 the coefficients of Fe and H" are respectively- (A) 6,7 (B) 6, 14 (C) 5,7 (D) 5, 14

Which of these refers to differences between team members in characteristics such as expertise, experlences, and perspectives?Coevitive divervityTheshemitionantingenReverse discriminationenit...

Kalomiris Construction, Inc. is a locally very important construction company listed on a regional stock exchange. Its main market is building single-family homes, either for individuals or for...

The following are excerpts of the equity and liabilities section of the balance sheet of four companies (with Notes when applicable). China International Marine Containers (China IFRS Source:...

Gilbert Company was created in early X1. Its original capital was 2,500 shares with a par value of 100 CU. The composition of the capital as of 31 December X9, is described in article 7 of the...

=+34. The accompanying data was extracted from the article Effects of Cold and Warm Temperatures on Springback of Aluminum-Magnesium Alloy 5083-H111 (J. Engr. Manuf., 2009: 427431). The response...

=+a 1 b1x1 1 b2x2 from the R software: obs 1 2 flth 1 92017 .0026900 278.78 2 51830 .0030000 124.53 3 17236 .0000196 22.65 4 15776 .0000360 28.68 5 33462 .0004960 32.66 6 243500 .0038900 604.70 7...

=+b. Transform only the dependent variable y so that a scatterplot of the transformed data shows a substantial linear pattern. Then fit a straight line to this data, use the line to establish an...