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Please help me with question A, B and C PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it
Please help me with question A, B and C
PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $155 million on equipment with an assumed life of 5 years and an assumed salvage value of $25 million for tax purposes. The firm uses straight ine depreciation. The old equipment can be sold today for $110 million. A new modem pool can be installed today for $180 million. This will have a 3 year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $24 million per year and decrease operating costs by $12 million per year. At the end of 3 years, the new equipment will be worthless. Assume the firm's tax rate is 35% and the discount rate for projects of this sort is 15%. a. What is the net cash flow at time O if the old equipment is replaced? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) & Answer is complete but not entirely correct. Net cash 70 00million b. What are the incremental cash flows in years 1, 2, and 3? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Answer is complete but not entirely correct. 35.30 remental cash flow 35 30lon per c. What are the NPV and IRR of the replacement project? (Do not round intermediate calculations. Enter the NPV in millions rounded to 2 decimal places. Enter the IRR as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct Pre 3 or s Next> Step by Step Solution
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