Unequal Lives Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Unequal Lives Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $180,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $94,000 per year; and Machine 360-6, which has a cost of $380,000, a 6-year life, and after-tax cash flows of $108,000 per year. Knitting machine prices are not expected to rise because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins's cost of capital is 16%. Calculate the two projects' extended NPVs. Do not round intermediate calculations. Round your answers to the nearest dollar. Machine 190-3: $ Machine 360-6: $ Should the firm replace its old knitting machine? If so, which new machine should it use? The firm should replace its old knitting machine with Machine 190-3 By how much would the value of the company increase if it accepted the better machine? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What is the equivalent annual annuity for each machine? Do not round intermediate calculations. Round your answers to the nearest dollar. Machine 190-3: $ Machine 360-6: $
Answer & Explanation
Solved by verified expert
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!
