Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please complete in excel and show all the steps and bold the final answer DDD is debating the purchase of a new digital scanner. The
Please complete in excel and show all the steps and bold the final answer
DDD is debating the purchase of a new digital scanner. The scanner they acquired 3 years ago for $1,000,000 is worth $250,000 today, and will have a salvage value of $150,000 after 6 more years. The current scanner generates revenues of $350,000 per year. The costs of operating the scanner are $160,000 per year. The company currently has $50,000 invested in operating net working capital. The new scanner will cost $1,260,000. The new scanner will generate revenues of $485,000 per year. In addition, the costs of operating the new scanner will be $215,000. The new scanner will allow the company to reduce its investment in operating net working capital to $30,000. At the end of 6 years, the new machine will have a salvage value of $140,000. The company's corporate tax rate is 20%. the CCA rate is 30% and the required rate of return is 8%. Assume the asset class remains open. Using net present value (NPV) calculation, determine if the company should purchase the new scanner. Show all work. Most importantly, you need to determine the incremental cash flows. DDD is debating the purchase of a new digital scanner. The scanner they acquired 3 years ago for $1,000,000 is worth $250,000 today, and will have a salvage value of $150,000 after 6 more years. The current scanner generates revenues of $350,000 per year. The costs of operating the scanner are $160,000 per year. The company currently has $50,000 invested in operating net working capital. The new scanner will cost $1,260,000. The new scanner will generate revenues of $485,000 per year. In addition, the costs of operating the new scanner will be $215,000. The new scanner will allow the company to reduce its investment in operating net working capital to $30,000. At the end of 6 years, the new machine will have a salvage value of $140,000. The company's corporate tax rate is 20%. the CCA rate is 30% and the required rate of return is 8%. Assume the asset class remains open. Using net present value (NPV) calculation, determine if the company should purchase the new scanner. Show all work. Most importantly, you need to determine the incremental cash flowsStep 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