Question
Here is text in case you cannot see image clearly.. incorrect,P11-3 (similar to) Question Help Expansion versus replacement cash flowsTesla Systems has estimated the cash
Here is text in case you cannot see image clearly..
| incorrect,P11-3 (similar to) | Question Help
|
Expansion versus replacement cash flowsTesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the following table.(Click on the icon here
in order to copy the contents of the data table below into a spreadsheet.)
| Project A | Project B | |
| Initial investment | $4,648,000 | $1,543,000* |
| Year | Operating cash flows | |
| 1 | $551,000 | $378,000 |
| 2 | 924,000 | 378,000 |
| 3 | 1,349,000 | 378,000 |
| 4 | 2,229,000 | 378,000 |
| 5 | 3,404,000 | 378,000 |
*After-tax cash inflow expected from liquidation.
a. If Project A, which requires an initial investment of
$4,648,000,
is a replacement for Project B and the
$1,543,000
initial investment shown for Project B is the after-tax cash inflow expected from liquidating it, what would be the net cash flows for this replacement decision?
b. How can an expansion decision such as project A be viewed as a special form of a replacement decision? Explain.
a. Calculate the relevant cash flows for this replacement decision:(Round to the nearest dollar.)
| Relevant | ||
| Year | Cash Flows | |
| 0 | $ |
|
| 1 | $ |
|
| 2 | $ |
|
| 3 | $ |
|
| 4 | $ |
|
| 5 | $ |
|
cxpansion versus replacement casi lows Tesla Systems has esulateu casti lows over the 5-year lives of two projects, Aan D. These casni lows are summarizeu in the Ollowing ladie. (CHICK Unue icon here loruer lu copy lie contents of the wala lanie below ITILU a spreaustieel.) Project A Project B Initial investment -$4,648,000 $1,543,000* Year Operating cash flows 1 $551,000 $378,000 2 924,000 378,000 3 1,349,000 378,000 4 2,229,000 378,000 5 3,404,000 378,000 *After-tax cash inflow expected from liquidation. a. If Project A, which requires an initial investment of - $4,648,000, is a replacement for Project B and the $1,543,000 initial investment shown for Project B is the after-tax cash inflow expected from liquidating it, what would be the net cash flows for this replacement decision? b. How can an expansion decision such as project A be viewed as a special form of a replacement decision? Explain. a. Calculate the relevant cash flows for this replacement decision: (Round to the nearest dollar.) Relevant Year Cash Flows 0 $ 1 $ 2 $ 3 $ 4. $ 5 $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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
Mechanics Of Materials
Authors: Russell C. Hibbeler
11th Edition
9783540245568
