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Can anyone please help find the change in the PV of cash flows, initial investment, NPV, and IRR? thank you. ABC Company is considering replacing
Can anyone please help find the change in the PV of cash flows, initial investment, NPV, and IRR? thank you.
ABC Company is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a current book value of $450,000 and a remaining useful life of 5 years. The current machine would be worthless and worn out in 5 years, but ABC can sell it now for $135,000. The old machine is being depreciated by $90,000 per year for each year of its remaining life. The new machine has a purchase price of $775,000, estimated useful life and MACRS class life of 5 years, and an estimated an salvage value of $105,000. Depreciation rates per year are: 20% , 32 % , 19%, 12% , 11%, and 6%. The new machine is expected to save $185,000 annually. The company's tax rate is 35% , and its cost of capital is 12%. Find : The Initial Investment, the change in the PV of the cash flows, the NPV, and the IRRStep by Step Solution
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