Calculate theafter-tax cash inflows and outflows of the"modernize" and"replace" alternatives over the 2021 - 2027 period.

2.

Calculate the net present value of the"modernize" and"replace" alternatives.

3.

Suppose Modern Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Modern Chips has been approached bySpain, Malaysia, and Australia to construct plants in their countries. Briefly describe in qualitative terms the income tax features that would be advantageous to Modern Chips.

Modern Chips is a manufacturer of prototype chips based in Buffalo, New York. i (Click the icon to view the prototype chips information.) (Click the icon to view information on the options.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirements 1 and 2. Calculate the after-tax cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021 - 2027 period and calculate the net present value for each alternative. Let's begin with the "modernize" alternative. Start by computing the present value of the after-tax cash flows from operations, then calculate the present value of the after-tax cash savings from depreciation and the terminal disposal value, and finally, determine the total net present value (NPV) of the investment for the "modernize" alternative. (Round intermediary calculations and your final answers to the nearest whole dollar. Use a minus sign or parentheses for a negative present value of net cash flows.) Net Cash Present Value PV factor Inflow of Cash Flows Net initial investment After-tax cash flows from operations: Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 Dec 31, 2025 Dec 31, 2026 Dec 31, 2027i (Click the icon to view the prototype chips information.) (Click the icon to view information on the options.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirements 1 and 2. Calculate the after-tax cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021 - 2027 period and calculate the net present value for each alternative. Let's begin with the "modernize" alternative. Start by computing the present value of the after-tax cash flows from operations, then saleulate the procent value of the after toy each savings from doncaniation and the tominal disp finally, determine the total net present value (NPV) of the investment for the "modernize" alternative. (Round intermediary calcul a ne value of net cash flows.) i More Info X Net Cash Present Value PV factor Inflow of Cash Flows Next year, in 2021, Modern Chips expects to deliver 562 prototype chips at an average price of $75,000. Modern Chips' marketing vice president forecasts growth of 50 prototype chips per year through 2027. That is, demand will be 562 in Requirements - X 2021, 612 in 2022, 662 in 2023, and so on. The plant cannot produce more than 532 prototype chips annually. To meet future demand, Modern Chips must either modernize the plant or replace it. The old 1 . Calculate the after-tax cash inflows and outflows of the "modernize" and "replace" equipment is fully depreciated and can be sold for $3,800,000 if the plant is alternatives over the 2021 - 2027 period. replaced. If the plant is modernized, the costs to modernize it are to be capitalized 2. Calculate the net present value of the "modernize" and "replace" alternatives. and depreciated over the useful life of the modernized plant. The old equipment is retained as part of the "modernize" alternative. 3. Suppose Modern Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Modem Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Briefly describe in qualitative terms the income tax features that would be advantageous to Modern Chips. Print Done Print Donei (Click the icon to view the prototype chips information.) (Click the icon to view information on the options.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirements 1 and 2. Calculate the after-tax cash inflows and o i Data Table - X alue for each alternative. Let's begin with the "modernize" alternative. Start by computing the savings from doprociation and the forminal dispos inally, determine the total net present value (NPV) of the investme value of net cash flows.) X a neg The following data on the two options are available: Modernize Replace PV factor Initial investment in 2021 36,300,000 $ 66,300,000 eliver 562 prototype chips at an Terminal disposal value in 2027 $ 6,800,000 $ 15,800,000 teting vice president forecasts i Requirements Useful life 7 years 7 years 2027. That is, demand will be 562 in Total annual cash operating cost per prototype chip $ 58,000 $ 47,000 type chips annually. To meet future Modern Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, the plant or replace it. The old 1. Calculate the after-tax cash inflows and outflows of the we assume no change in prices or costs in future years. The investment will be made at the beginning for $3,800,000 if the plant is alternatives over the 2021 - 2027 period of 2021, and all transactions thereafter occur on the last day of the year. Modern Chips' required rate to modernize it are to be capitalized 2. Calculate the net present value of the "modernize" and " of return is 18%. There is no difference between the "modernize" and "replace" alternatives in terms of ernized plant. The old equipment is 3. required working capital. Modern Chips pays a 45% tax rate on all income. Proceeds from sales of Suppose Modern Chips is planning to build several more equipment above book value are taxed at the same 45% rate. advantageous tax position possible. Modem Chips has Malaysia, and Australia to construct plants in their count terms the income tax features that would be advantaged one Print Done Print Done