7 4 Check my work 1 points eBook Print PC Shopping Network may upgrade its modem...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/664c7f2891464_320664c7f286c6f1.jpg)
Transcribed Image Text:
7 4 Check my work 1 points eBook Print PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $145 million on equipment with an assumed life of 5 years and an assumed salvage value of $15 million for tax purposes. The firm uses straight-line depreciation. The old equipment can be sold today for $100 million. A new modem pool can be installed today for $180 million. This will have a 3-year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $27 million per year and decrease operating costs by $14 million per year. At the end of 3 years, the new equipment will be worthless. Assume the firm's tax rate is 30% and the discount rate for projects of this sort is 8%. Required: a. What is the net cash flow at time 0 if the old equipment is replaced? Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What are the incremental cash flows in years: (i) 1; (ii) 2; (iii) 3? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. c. What is the NPV of the replacement project? Note: Do not round intermediate calculations. Enter the NPV in millions rounded to 2 decimal places. d. What is the IRR of the replacement project? Note: Do not round intermediate calculations. Enter the IRR as a percent rounded to 2 decimal places. Mc Crow a. Net cash flow million b. Incremental cash flow $ 46.70 million per year C. NPV d. IRR million % Prov 7 of 15 Novt 7 4 Check my work 1 points eBook Print PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $145 million on equipment with an assumed life of 5 years and an assumed salvage value of $15 million for tax purposes. The firm uses straight-line depreciation. The old equipment can be sold today for $100 million. A new modem pool can be installed today for $180 million. This will have a 3-year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $27 million per year and decrease operating costs by $14 million per year. At the end of 3 years, the new equipment will be worthless. Assume the firm's tax rate is 30% and the discount rate for projects of this sort is 8%. Required: a. What is the net cash flow at time 0 if the old equipment is replaced? Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What are the incremental cash flows in years: (i) 1; (ii) 2; (iii) 3? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. c. What is the NPV of the replacement project? Note: Do not round intermediate calculations. Enter the NPV in millions rounded to 2 decimal places. d. What is the IRR of the replacement project? Note: Do not round intermediate calculations. Enter the IRR as a percent rounded to 2 decimal places. Mc Crow a. Net cash flow million b. Incremental cash flow $ 46.70 million per year C. NPV d. IRR million % Prov 7 of 15 Novt
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
The marketing department for an upscale retail catalog company wants to determine if there are differences in the mean customer purchase amounts across the available purchase sources (Internet,...
-
Refer to the Fresh Springs Bottling Department Data Set. 1. Draw a time line. 2. Complete the first two steps of the process costing procedure for the Bottling Department: summarize the physical flow...
-
Directions: Read the following questions carefully and provide the details/data required. 1. Tata Company has engaged in the following transactions during May: May 1 May 4 May9 Ma 20 May 24 Required:...
-
Which of the following assertions is accurate concerning the IAASB? (a) The International Auditing and Assurance Standards Board (IAASB) is an independent standard-setting body that serves the public...
-
The trial balance of Lexington Inn Company at December 31, 2012, and the data needed for the month-end adjustments follow. Adjustment data at December 31 follow: a. Prepaid insurance still in force,...
-
bba 1st semester. Wise Cost Company started a new business of selling Lap Tops. Some of the transections they made in January 2021 are summarized below. January 1 purchased 5 lap tops @ $ 500 each...
-
Identify the term which has both descriptive and evaluative meaning in the following sentence. The Governor announced that the budget for social services would be slashed by 12 per cent over the next...
-
Problem 1 (Powers of Two Without Going Over) Write and test a function ced pow_of_two() that takes a positive integer num as the input parameter and returns another integer that is the largest power...
-
Consider the following income statement for the Hoffman Company for the year ended December 31, 2022 and the balance sheets for December 31, 2021 and 2022. Based on these statements, construct the...
-
You are expected to find 1 current news article from a credible media NEWS source (current Canadian newspaper, magazine) and analyze the contents. Summary - should be in a paragraph, outlining the...
-
The following five tasks are to be scheduled on a single processor preemptively. Construct the schedule when the priority ceiling protocol is applied for resource access control. Explain the schedule...
-
Date range: 1 June 2018 - 8 June 2018 Bank reconciliation is the process of matching bank statement lines imported into Xero from your bank account, with account transactions you've created in Xero...
-
Find a basis for the eigenspace of A associated with the given eigenvalue . -5 = [1 - 5], ^ = 6 31-1 A = Submit Answer 4
-
Determine the volume of the parallelepiped of Fig. 3.25 when (a) P = 4i 3j + 2k, Q = 2i 5j + k, and S = 7i + j k, (b) P = 5i j + 6k, Q = 2i + 3j + k, and S = 3i 2j + 4k. P
-
(a) Prove the equivalence (5.25), including the inequalities, for real numbers \(A, B, C\) that fulfill \(A
-
Complete the proof of Proposition 5.2 for the third case \(x_{1}
-
Find positive weights \(w\) in a utility function of the form \(u\left(c_{1}, c_{2} ight)=\) \(c_{1}+w \cdot c_{2}\) to create at least four different strict rankings among the candidates \(x, y, z\)...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App