Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please show work for all The Select Comfort Company purchased a mattress-stuffing machine 5 years ago for $70,000. When purchased, it had an estimated salvage

please show work for all

image text in transcribed
The Select Comfort Company purchased a mattress-stuffing machine 5 years ago for $70,000. When purchased, it had an estimated salvage value of $5,000 at the end of seven years. Last year, the mattress machine was overhauled at a cost of $3,000. The old machine can be sold today for $20,000. A new machine can be purchased for $69,300. It has a 2-year life and is expected to reduce operating expenses by $50,000 per year. After 2 years, the new machine can be sold for $20,000. The company's cost of capital is 9% and the tax rate is 35%. Assume that depreciation is not tax deductible. Answer the following questions. What are the initial cash flows? (Answer in dollars and round to the nearest dollar.) $ -49800 X Check Answer What are the operating cash flows at the end of the first year? (Answer in dollars and round to the nearest dollar.) $ 32500 Check Answer What are the terminal year cash flows? (Answer in dollars and round to the nearest dollar.) $ 52500 X Check Answer What is the NPV of the replacement cash flows? (Answer in dollars and round to the nearest dollar.) $ 24205 X

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

Accounting Principles Volume 2

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

8th Canadian Edition

1119502551, 1-119-50255-5, 978-1119502555

More Books

Students also viewed these Accounting questions