Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Check my work PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $ 1 1 0 million
Check my work
PC Shopping Network may upgrade its modem pool. It last upgraded years ago, when it spent $ million on equipment with an assumed life of years and an assumed salvage value of $ million for tax purposes. The firm uses straightline depreciation. The old equipment can be sold today for $ million. A new modem pool can be installed today for $ million. This will have a year life and will be depreciated to zero using straightline depreciation. The new equipment will enable the firm to increase sales by $ million per year and decrease operating costs by $ million per year. At the end of years, the new equipment will be worthless. Assume the firm's tax rate is and the discount rate for projects of this sort is
Required:
a What is the net cash flow at time if the old equipment is replaced?
Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to decimal places.
b What are the incremental cash flows in years: i; ii; iii
Note: Do not round intermediate calculations. Enter your answer in millions rounded to decimal places.
c What is the NPV of the replacement project?
Note: Do not round intermediate calculations. Enter the NPV in millions rounded to decimal places.
d What is the IRR of the replacement project?
Note: Do not round intermediate calculations. Enter the IRR as a percent rounded to decimal places.
tablea Net cash flow,,millionb Incremental cash flow,,million per yearc NPVmilliond IRR,,
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started