90.2K

Verified Solution

Link Copied!

The Douton Toy Corporation uses an indection molding machine that was purchaved prior to the mw tax legislation. This machine is being depreciated on a straight-in baw and taso years of remaining Me. Its current book value is $2,100, and can be sold for $2,600 at this time. Thus, the annual depreciation expensis $2.100/6-3350 per year, the old machine is not replaced, it can be sold for $500 the end of its useful life Dauton is offered a replacement machine which he cost of $1,000, an estimated settle of years, and an estimated salvage value of $800. The replacement machines eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permitan output expansion, so sales would rise by 800 per year, even so, the new machine's much greater aleney would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would simultaneously increase by 800 Daten's marginal federal-plus-state tax rate is 25%, and its WACC IS 11% What is the NPV of the incremental cash flow stream Negative value, my should be indicated by a minus sion, Round your answer to the nearest cent. Should the company replace the old machine? The Douton Toy Corporation uses an indection molding machine that was purchaved prior to the mw tax legislation. This machine is being depreciated on a straight-in baw and taso years of remaining Me. Its current book value is $2,100, and can be sold for $2,600 at this time. Thus, the annual depreciation expensis $2.100/6-3350 per year, the old machine is not replaced, it can be sold for $500 the end of its useful life Dauton is offered a replacement machine which he cost of $1,000, an estimated settle of years, and an estimated salvage value of $800. The replacement machines eligible for 100% bonus depreciation at the time of purchase. The replacement machine would permitan output expansion, so sales would rise by 800 per year, even so, the new machine's much greater aleney would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,500, but accounts payable would simultaneously increase by 800 Daten's marginal federal-plus-state tax rate is 25%, and its WACC IS 11% What is the NPV of the incremental cash flow stream Negative value, my should be indicated by a minus sion, Round your answer to the nearest cent. Should the company replace the old machine

Answer & Explanation Solved by verified expert

See Answer