complete the following table and compute, the incremental cash flows associated with the replacement of the old equipment with the new equipment.
The company wall need to do replacement analys to deternine which option is the best financial decision for the company. LoRusso Co. is conuldering replacing an existing piece of equipment. The project imvives the followingt - The new equipment wall have a cost of $1,000,000, and it will be depreciated on a straight-line basis over a period of six years frears 1-6). - The old machine is also being depreciased on a straght-line bavk, It has a book value of $200,000 (at year 0) and four more years of depreciation left (\$\$0,000 per year). - The new equipenent wil have a salvoge value of $0 at the end of the project's lfe (rear 6 ). The old machine has a current salvage walue (at year o) of $300,000. - Replacing the old machine inll require an investment in net working capital (NwC) of $30,000 that wall be recovered ac the end of the project's life (rear 6). - The new machine is more efficient, so the firm's incremental earnings before interest and taxer (Eam) will increase by a total of $700,000 in each of the next sky years (years 1-6). Hints This value represents the difference between the revenues and eperating costs (induding depredation expense) oenerated using the nent equipenent and that earned using the old equipment. - The project's cost of capiral is 13%. - The comparty's annual tax rate is 35 s. Complete the following table and compute the incremental cash flows associated with the replacenent of the old equipment wht the new equipment The ner present value (NDV) of this replacement project is: 11: Assignment-Cash Flow Estimation and Risk Analysis value (at year 0 ) of $300,000. - Replacing the old machine will require an investment in net working capial (NWC) of $30,000 that will be recovered at the end of the project's life (year 6). - The new machine is more efficient, so the firm's incremental earnings before interest and taxes (FBrT) will increase by a total of $700,000 in each of the next six years (years 1-6). Hint: This value represents the difference between the revenues and operabing costs (induding depreciation expense) generated using the new equipment and that earned using the old equipment. - The project's cost of capital is 13%. - The company's annual tax rate is 35%. Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment wich the new equipmer The net pessere value (NPV) of this replacement project is: $546.586 $763,181 57 31.382 tess5.9ex The company wall need to do replacement analys to deternine which option is the best financial decision for the company. LoRusso Co. is conuldering replacing an existing piece of equipment. The project imvives the followingt - The new equipment wall have a cost of $1,000,000, and it will be depreciated on a straight-line basis over a period of six years frears 1-6). - The old machine is also being depreciased on a straght-line bavk, It has a book value of $200,000 (at year 0) and four more years of depreciation left (\$\$0,000 per year). - The new equipenent wil have a salvoge value of $0 at the end of the project's lfe (rear 6 ). The old machine has a current salvage walue (at year o) of $300,000. - Replacing the old machine inll require an investment in net working capital (NwC) of $30,000 that wall be recovered ac the end of the project's life (rear 6). - The new machine is more efficient, so the firm's incremental earnings before interest and taxer (Eam) will increase by a total of $700,000 in each of the next sky years (years 1-6). Hints This value represents the difference between the revenues and eperating costs (induding depredation expense) oenerated using the nent equipenent and that earned using the old equipment. - The project's cost of capiral is 13%. - The comparty's annual tax rate is 35 s. Complete the following table and compute the incremental cash flows associated with the replacenent of the old equipment wht the new equipment The ner present value (NDV) of this replacement project is: 11: Assignment-Cash Flow Estimation and Risk Analysis value (at year 0 ) of $300,000. - Replacing the old machine will require an investment in net working capial (NWC) of $30,000 that will be recovered at the end of the project's life (year 6). - The new machine is more efficient, so the firm's incremental earnings before interest and taxes (FBrT) will increase by a total of $700,000 in each of the next six years (years 1-6). Hint: This value represents the difference between the revenues and operabing costs (induding depreciation expense) generated using the new equipment and that earned using the old equipment. - The project's cost of capital is 13%. - The company's annual tax rate is 35%. Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment wich the new equipmer The net pessere value (NPV) of this replacement project is: $546.586 $763,181 57 31.382 tess5.9ex
