Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000.

image text in transcribed

image text in transcribed

Metlock Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 years ago at a cost of $121,000. At that time, the equipment had an expected life of 10 years, with no expected salvage value. The equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $43,500. The new equipment can be bought for $173,440, including installation. Over its 10 -year life, it will reduce operating expenses from $190,600 to $148,700 for the first six years, and from $202,600 to $191,800 for the last four years. Net working capital requirements will also increase by $20,900 at the time of replacement. It is estimated that the company can sell the new equipment for $24,100 at the end of its life. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Click here to view the factor table. Your answer is incorrect. Calculate the project's net present value. (If the net present value is negative, use either a negative sign preceding the number eg. - 45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.) Net present value $ eTextbook and Media

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Risk Analysis Approach

Authors: Larry F. Konrath

5th Edition

032405789X, 9780324057898

More Books

Students also viewed these Accounting questions

Question

b. What is the density of this graph? B A D G

Answered: 1 week ago

Question

How reliable is this existing information?

Answered: 1 week ago