1
answer
0
watching
571
views

The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $100,000. It had an expected life of 10 years when it was bought and is being depreciated by the straight-line method by $10,000 per year. As the older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life. A new high-efficiency, digital-controlled flange-lipper can be purchased for $130,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $50,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $50,000. The firm's tax rate is 35%, and the appropriate WACC is 14%.

A).If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0? Round your answer to the nearest whole dollar. Enter negative answers with minus sign

B.)What are the incremental net cash flows that will occur at the end of Years 1 through 5? Round your answers to the nearest whole dollar.

CF1 $

CF2 $

CF3 $

CF4 $

CF5 $

C).What is the NPV of this project? Round your answer to the nearest whole dollar. $

D).Should Everly replace the flange-lipper?

For unlimited access to Homework Help, a Homework+ subscription is required.

Deanna Hettinger
Deanna HettingerLv2
29 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in

Related questions

Weekly leaderboard

Start filling in the gaps now
Log in