Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 6. you are considering replacing the plastic extru

6. You are considering replacing the plastic extrusion machine that create basic moldings of the outdoor...

50.1K

Verified Solution

Question

Finance

6. You are considering replacing the plastic extrusion machinethat create basic moldings of the outdoor pool furniture yourcompany produces. The current extrusion machine was purchased twoyears ago for $240,000 and is being depreciated on the straightline basis over 5 years towards a zero salage value. Although theold machine is anticipated to have a salvage value of $40,000 threeyears from now, it can be sold today for $150,000. The new machinecosts $400,000 and will be depreciated on a straightline basistoward a zero-salvage value over a 5-year period. At the end ofthree years, you expected to be able to sell it for and $50,000.You have estimated that the more modern form of the furniture willresult in sales increasing of $220,000 per year. Manufacturingcosts are anticipated to increase $120,000 per year. The firm is inthe 40% tax bracket.

a. What are the net of free cash flow for each year?

b. Assume the answer of part a is as follow:

Year 0 Year 1 Year 2 Year 3
Net Cash Flow $(275,000) $115,000 $140,000 110,000

What is the IRR for this project?

Answer & Explanation Solved by verified expert
4.5 Ratings (975 Votes)
Answer aCurrent extrusion machineThe current extrusion machine was purchased two years ago for240000    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

Scenario analysis: Chip’s Home Brew Whiskey forecasts that if it sells each bottle of Snake-Bite for...

Psychology
1.2K views

Impulse buying has become a significant problem in our culture with the easy access we have...

General Management
1.2K views

8. Define the Lean Six Sigma approach? And his Benefits? 9. What is the difference between the...

Geometry
1.2K views

4 For a regular tetrahedron find the number of faces vertices and edges in the...

Algebra
1.2K views

What is the scale factor if a 16 by 14 photograph is enlarged to a...

Algebra
1.2K views

A quadratic function is defined by the equation f(x) =-1/2 (x + 5) - 11.If...

Accounting
1.2K views

I'm having the hardest time understanding how to calculate the Ending Work in Process Inventory...

Accounting
1.2K views

please show all steps Equivalent Units and Related...

Accounting
1.2K views

E3-12 Identifying Activities Affecting the Statement of Cash Flows LO3-5 Stacey's Piano Rebuilding Company has...

Accounting
1.2K views

Problem-solving 2 Selling price per unit is PhP 10 Fixed cost = PhP 25000 Variable...

Accounting
1.2K views

Svahn, AB, is a Swedish manufacturer of sailing yachts. The company has assembled the information...

Accounting
1.2K views

Check my work Logistics Solutions provides order futilment services for dot.com merchants. The company maintains...