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Poultry for Less is considering the replacement of one of its chicken processing units. The new unit will cost $230,000 and will require $10,000 in
Poultry for Less is considering the replacement of one of its chicken processing units. The new unit will cost $230,000 and will require $10,000 in installation and $15,000 for shipping The firm expects the new production to increase A/R by $50,000 while inventories rise by $10,000 Accounts payables will rise by $25,000 because of the project. The economic life of the project is 4 years and it will be depreciated on 7 year MACRS schedule. The old machinery that has a book value of $35,000 can be sold for $20,000. When the project ends, the new machinery can be sold for $35,000. . The new machinery is expected to generate $150,000 in new sales and COGS will be $98,000 Payback is 4.5 years and discounted payback is 3.75 years Tax Rate =40% Determine whether or not to expand using NPV, IRR, Payback, Discounted Payback
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