question 12

r ovnou y uy vrou QUESTION 12 Replacement Project A Firm is considering the Replacement of the Existing Equipment. The Firm's Marginal Tax Rate is 40% - The Old Equipment was purchased two years ago at a cost of $120M with an expected useful life of 6 years. The Old Equipment is depreciated on a Straight-Line Basis and can be sold today for $SOM. If not replaced, the Equipment will have a Salvage Value of $30M at the End of its Useful Life - The New Equipment costs $450M, requires an additional cost of $50M for Shipping and installation, has an Estimated Life of 4 years and a Salvage Value of $150M. The Equipment falls into MACRS 5-Year Class and will increase Revenues by $120M Por Your, while Reducing Operating costs by $40M Per Year. The New Equipment requires an increase in NWC of $10M at Year 11% Year 6: 6% 5-Year MACRS: Year 1: 20%, Year 2:32%, Year 3: 19%, Year 4:12%, Yoar What is the Cash Flow at Year 1? $130M $136M $122M $128M QUESTION 13 Gridwise is considering a Project that has the following Cash Flows Cash Flow SA 200 $9.000 $1,000 H OW ORE A QO2 = 0 MacBook Air 23ODQQQQ0B