Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Albertosi Company is considering replacing an old machine, which is totally depreciated using the straight-line method with zero book value; however, it can be sold

Albertosi Company is considering replacing an old machine, which is totally depreciated using the straight-line method with zero book value; however, it can be sold as a secondhand machine to another company for $6,000. The new machine can be purchased for $80,000, including installation. The machine reduces the labor cost of the company by $16,500 per year and reduces damages by $400 per month. However, electricity costs will go up by $100 per month and maintenance costs by $900 per month. The machine has no effect on sales. The operation new machine requires an increase of $4,000 in NWC (will be recovered at the end of the project). The machine falls into a 5-year MACRS class. The life of the project is expected to be six years, at which time the company sells the machine for $5,000. The Company tax rate is 40 percent, and its WACC for this project is 11.83 percent.

What are MIRR and NPV of this project? You must show your solutions step by step. You need to explain the approach that you use to solve this problem in writing as well, use Word for the explanation. No credit will be given without explanation.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Research In Finance

Authors: John W. Kensinger

1st Edition

0857245414, 978-0857245410

More Books

Students also viewed these Finance questions

Question

When is the best time to practice psychological skills?

Answered: 1 week ago

Question

5. Identify and describe nine social and cultural identities.

Answered: 1 week ago

Question

2. Define identity.

Answered: 1 week ago

Question

4. Describe phases of majority identity development.

Answered: 1 week ago