Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. a company must develop the relevant cash flows for

A company must develop the relevant cash flows for a replacement capital investment proposal. The proposed...

60.1K

Verified Solution

Question

Finance

A company must develop the relevant cash flows for a replacementcapital investment proposal. The proposed asset costs $50,000 andhas installation costs of $3,000. The asset will be depreciatedusing a five-year recovery schedule. The existing equipment, whichoriginally cost $25,000 and will be sold for $10,000, has beendepreciated using an MACRS five-year recovery schedule and threeyears of depreciation has already been taken. The new equipment isexpected to result in incremental before-tax net profits of $15,000per year. The firm has a 40 percent tax rate. Note: Assume thatboth the old and the new equipment will have terminal values of $0at the end of year 5. The WACC for the company is 10%.

1- determine the NPV

2- determine the IRR

3- should it reject or accept the replacement and explainwhy

PLEASE SHOW ALL WORK THROUGH EXCEL!!!!!!!!!

Answer & Explanation Solved by verified expert
4.2 Ratings (556 Votes)
    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: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Choose the correct answer. Imagine you are writing an argumentative essay on the negative effects...

Biology
Q

The Redford Investment Company bought 90 Cinema Corp. warrants one year ago and would like to...

Finance
Q

An LCR circuit as shown in the figure is connected to a voltage source V...

Physics
Q

7 A 100 eV electron is fired directly towards a large metal plate having surface...

Physics
Q

Suppose that the functions p and q are defined as follows.p(x) = -xq (x) =...

Basic Math
Q

The half life of cesium 137 is 30 years Suppose we have a 180 mg...

Calculus
Q

What would the most efficient first step to solving this 3 Variable System of Equations...

Algebra
Q

Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year....

Accounting
Q

On January 2,2023, Crane Company acquired equipment to be used in its manufacturing operations. The...

Accounting
Q

The Seneca Corporation manufactures lamps. It has set up the following standards per finished unit...

Accounting
Q

QS 15-10 Manufacturing cost flows LO P1, P2, P3 On March 1 a dressmaker starts...

Accounting
Q

How is noncontrolling interest in subsidiary net income reflected in the consolidated financial statements added...

Accounting