Can You please show your work on paper
Can you please show your work on paper
Developing Relevant Cash Flows for Newman Upholstery Company's Machine Resewal or Replacement Decision Cosmo Kramer, chief financial officer of Newman Upholstery Company, expects the firm's mef pvofits after faves for the next $ years to be as shown in the following table. Veen Ne pedes afier wese Husiace 5165,000 sitice0 5315,,000 Cosmo is beginning to develop the relevant cash flows needed to analyze whether to renew or replace Newman's only depreciable asset, a machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable asset is fully depreciated.-its book value is zero--its expected net profits after taxes equal its operating cash inflows.) He estimates that at the end of 5 years, the existing machine can be sold to net $2,000 before taxes. Cosmo plans to use the following information to develop the relevant cash flows for each of the aliernatives. Alternative 1 Renew the existing machine at a total depreciable cost of 590,000 . The renewed machine would have a S-year usable life and deprecialed under straight line using a 5year recovery period (See depreciation schedule on the next page). Renewing the machine would result in the following projected revenues and expenses (excluding depreciation): The renewed machine would result in an increaved investment of $15,000 in net working capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000. The new machine would have a 5 -year usable life and be depreciated under straight line using a 5-year recovery period. The firm's projected revenues and expenses (excluding depreciation), if it acquires the machine, would be as follow: The new machine would result in an increased investment of $22,000 in net working capital. At the end of 5 years, the new machine could be sold to net $25,000 before taxes. The weighted average cost of capital is 12%. The marginal tax rate for Newman is 30%. Find the NPV, IRR, MIRR, payback and discounted payback for both alternatives. Which aliernative should be selected? Explain Straight line depreciation using a 5-year life with half year convention Year % 110% 220320420520610 Developing Relevant Cash Flows for Newman Upholstery Company's Machine Renewal or Replacement Decision Cosmo Kramer, chief financial officer of Newman Upholstery Company, expects the firm's net profits after taxes for the next 5 years to be as shown in the following table. Cosmo is beginning to develop the relevant cash flows needed to analyze whether to renew or replace Newman's only depreciable asset, a machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable asset is fully depreciated---its book value is zero---its expected net profits after taxes equal its operating cash inflows.) He estimates that at the end of 5 years, the existing machine can be sold to net $2,000 before taxes. Cosmo plans to use the following information to develop the relevant cash flows for each of the alternatives. Alternative 1 Renew the existing machine at a total depreciable cost of $90,000. The renewed machine would have a 5-year usable life and depreciated under straight line using a 5year recovery period (See depreciation schedule on the next page). Renewing the machine would result in the following projected revenues and expenses (excluding depreciation): The renewed machine would result in an increased investment of $15,000 in net working capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000. The new machine would have a 5 -year usable life and be depreciated under straight line using a 5 -year recovery period. The firm's projected revenues and expenses (excluding depreciation), if it acquires the machine, would be as follows: The new machine would result in an increased investment of $22,000 in net working capital. At the end of 5 years, the new machine could be sold to net $25,000 before taxes. The weighted average cost of capital is 12%. The marginal tax rate for Newman is 30%. Find the NPV, IRR, MIRR, payback and discounted payback for both alternatives. Which alternative should be selected? Explain. Straight line depreciation using a 5-year life with half year convention Developing Relevant Cash Flows for Newman Upholstery Company's Machine Resewal or Replacement Decision Cosmo Kramer, chief financial officer of Newman Upholstery Company, expects the firm's mef pvofits after faves for the next $ years to be as shown in the following table. Veen Ne pedes afier wese Husiace 5165,000 sitice0 5315,,000 Cosmo is beginning to develop the relevant cash flows needed to analyze whether to renew or replace Newman's only depreciable asset, a machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable asset is fully depreciated.-its book value is zero--its expected net profits after taxes equal its operating cash inflows.) He estimates that at the end of 5 years, the existing machine can be sold to net $2,000 before taxes. Cosmo plans to use the following information to develop the relevant cash flows for each of the aliernatives. Alternative 1 Renew the existing machine at a total depreciable cost of 590,000 . The renewed machine would have a S-year usable life and deprecialed under straight line using a 5year recovery period (See depreciation schedule on the next page). Renewing the machine would result in the following projected revenues and expenses (excluding depreciation): The renewed machine would result in an increaved investment of $15,000 in net working capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000. The new machine would have a 5 -year usable life and be depreciated under straight line using a 5-year recovery period. The firm's projected revenues and expenses (excluding depreciation), if it acquires the machine, would be as follow: The new machine would result in an increased investment of $22,000 in net working capital. At the end of 5 years, the new machine could be sold to net $25,000 before taxes. The weighted average cost of capital is 12%. The marginal tax rate for Newman is 30%. Find the NPV, IRR, MIRR, payback and discounted payback for both alternatives. Which aliernative should be selected? Explain Straight line depreciation using a 5-year life with half year convention Year % 110% 220320420520610 Developing Relevant Cash Flows for Newman Upholstery Company's Machine Renewal or Replacement Decision Cosmo Kramer, chief financial officer of Newman Upholstery Company, expects the firm's net profits after taxes for the next 5 years to be as shown in the following table. Cosmo is beginning to develop the relevant cash flows needed to analyze whether to renew or replace Newman's only depreciable asset, a machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable asset is fully depreciated---its book value is zero---its expected net profits after taxes equal its operating cash inflows.) He estimates that at the end of 5 years, the existing machine can be sold to net $2,000 before taxes. Cosmo plans to use the following information to develop the relevant cash flows for each of the alternatives. Alternative 1 Renew the existing machine at a total depreciable cost of $90,000. The renewed machine would have a 5-year usable life and depreciated under straight line using a 5year recovery period (See depreciation schedule on the next page). Renewing the machine would result in the following projected revenues and expenses (excluding depreciation): The renewed machine would result in an increased investment of $15,000 in net working capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000. The new machine would have a 5 -year usable life and be depreciated under straight line using a 5 -year recovery period. The firm's projected revenues and expenses (excluding depreciation), if it acquires the machine, would be as follows: The new machine would result in an increased investment of $22,000 in net working capital. At the end of 5 years, the new machine could be sold to net $25,000 before taxes. The weighted average cost of capital is 12%. The marginal tax rate for Newman is 30%. Find the NPV, IRR, MIRR, payback and discounted payback for both alternatives. Which alternative should be selected? Explain. Straight line depreciation using a 5-year life with half year convention
