Question: You need to replace a machine in your business and you are evaluating a machine with a 5 - year life. The machine costs $

You need to replace a machine in your business and you are evaluating a machine with a 5-year life.
The machine costs $500,000 and will be depreciated $100,000 each year for the 5 years you own it.
The main advantage of this machine is that it will save you $217,000 per year before taxes in operating expenses.
Assume no salvage value, and the purchase will have no impact on your net working capital (NWC).
Your tax rate is 21% and your cost of capital for this purchase is 10% per year.
What is the NPV of this machine?
Enter your answer in dollars and cents.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
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!

Q:

Dwight Donovan, the president of Benson Enterprises, is considering two Investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase...

Q:

You need to replace a machine in your business and you are evaluating a machine with a 5 - year life. The machine costs $ 5 0 0 , 0 0 0 and will be depreciated $ 1 0 0 , 0 0 0 each year for the 5...

Q:

A company called PT ABC is considering investing in a new project. The following is the available information regarding the project: Initial investment: IDR 2,000,000,000 Net cash flow per year: Year...

Q:

Replace Equipment machine with a book value of $245,300 has an estimated six-year life. A proposal is offered to sell ost of $282,500. The the old machine for $215,900 and replace it with a new...

Q:

The questions were written in the questions.doc file. And there were some links in the questions like as we did during the lecture, so I provided the lecture slides as well. HOMEWORK 5 1) The owner...

Q:

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,300,000; the new one will cost, $1,560,000. The new machine will be depreciated straight-line to zero...

Q:

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $650,000; the new one will cost $780,000. The new machine will be depreciated straight-line to zero over...

Q:

Replacement Decisions [LO2] Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,560.000; the new one will cost $1.872.000. The new machine will be...

Q:

Accounting 2 Assignment Details Introduction to Managerial Accounting Over the last year Wyman plc has spent 100,000 developing a new product the "MC5" which if launched is expected to have a life of...

Q:

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $650,000; the new one will cost $780,000. The new machine will be depreciated straight-line to zero over...

Q:

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,370,000; the new one will cost, $1,630,000. The new machine will be depreciated straight-line to zero...

Q:

A television manufacturing company manufactures three types of televisions, namely A, B and C, and makes a profit of Rs. 300, Rs. 200 and Rs. 400 respectively on each type of set. Each TV passes...

Q:

JCPenney Company accepts both its own credit cards and national credit cards. What are the advantages of accepting both types of cards?

Q:

54. An IBD/TIPP poll conducted to learn about attitudes toward investment and retirement (Investors Business Daily, May 5, 2000) asked male and female respondents how important they felt level of...

Q:

In which of the following arrangements must a person be a union member in order to be hired? Resource: chapter 1 2 , section 2 , "Collective Bargaining." Question 7 options: a ) an agency shop b ) a...

Q:

=+d. Purchaser: buys the item.

Q:

=+3. Speak in an appropriate tone of voice. If you're reaching out to families looking for a fun vacation look at how Disney vacations always sound like exciting adventures.

Q:

3 When you are in a position, either now or in the future, to have an impact on the psychological contracts of other people (e. g. those reporting to you), what are the key lessons you will keep in...