Question
Create an Excel spreadsheet: Atlantic Control Company purchased a machine four years ago at a cost of $70,000. At that time the machine's expected economic
Create an Excel spreadsheet:
Atlantic Control Company purchased a machine four years ago at a cost of $70,000. At that time the machine's expected economic life was six years and the expected salvagte value was $10,000 at the end of its life. The machine is being depreciated using the straight line method so that its book value at the end of six years is $10,000.A new machine can be purchased for $80,000 including shipping and installation costs. It has an economic life estimated at four years. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 4-year economic life. (MACRS 3-year schedule = 33%, 45%, 15%, 7%). During its 4-year life the new machine will reduce Atlantic's cash operating expenses by $20,000 per year. Sales are not expected to change but the new machine will require an increase in net working capital of $4,000. At the end of its useful life, the machine is estimated to have a market value of $2,500.The old machine can be sold today for $20,000. If it is not replaced the company believes that the old machine can be usd for another four years. At that time the old machine will be worthless, so its market value will be zero. Atlantic's tax rate is 40%, and its required rate of return is 10 percent.
What is the project's: PB, DPB,IRR, MIRR,NPV, and PI?
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