Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

answer using excel please DDD is debating the purchase of a new digital scanner. The scanner they acquired 3 years ago for $500,000 is worth

answer using excel please image text in transcribed
DDD is debating the purchase of a new digital scanner. The scanner they acquired 3 years ago for $500,000 is worth $150,000 today, and will have a salvage value of $45,000 after 7 more years. The current scanner generates revenues of $300,000 per year. The costs of operating the scanner are $180,000 per year. The company currently has $50,000 invested in operating net working capital. The new scanner will cost $760,000. The new scanner will generate revenues of $485,000 per year. In addition, the costs of operating the new scanner will be $195,000. The new scanner will allow the company to immediately reduce its investment in operating networking capital to $20,000. At the end of 7 years, the new machine will have a salvage value of $140,000. The company's corporate tax rate is 30%, the CCA rate is 20% and the required rate of return is 8%. Assume the asset class remains open. Using net present value (NPV) calculation, determine if the company should purchase the new scanner. Show all work. Most importantly, you need to determine the incremental cash flows. Note: All of Calculations should be rounded to the nearest dollar

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions