Q4) Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $46,658.00
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Q4) Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $46,658.00 seven years ago. The old equipment currently has no market value. The new equipment cost $83,914.00 . The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $24,673.00 . The new equipment is expected to save the firm $26,858.00 annually by increasing efficiency and cost savings. The corporation has tax rate of 30.89% and a required return on capital of 13.10% . |
a) What is the total initial cash outflow? (show as negative number - 2.5 Points) |
b) What are the estimated annual operating cash flows? (2.5 Points) |
c) What is the terminal cash flow? (2.5 Points) |
d) What is the NPV for this project? (2.5 Points) |
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