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The Nelson Equipment Company purchased a machine 5 years ago at a cost of $420,000. The machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $20,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $20,000, or by $40,000 per year. A new machine can be purchased for $450.000 and require an additional $50,000 in installation costs. The new machine will require $35,000 in additional spare parts. During its 5- year life, it will reduce cash operating expenses by $175,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $10,000. ACRS depreciation will be used, and the machine will be depreciated over its 3-year class lite rather than its 5-year economic life. The old machine can be sold today for $50,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) 17. .000. The machine had an expect at the end of the $50.000, or by Ine Nelson Equipment Company purchased a machine 5 years ago at a cost of The machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $50.000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $50,000, or by $15,000 per year. A new machine can be purchased for $400,000 and require an additional $15,000 in installation costs. The new machine will require $20,000 in additional spare parts. During its 5-year life, it will reduce cash operating expenses by $150,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $50.000. ACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life. The old machine can be sold today for $175,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) What is the NET COST of the machine? (That is, what is the initial cash outflow?) are not expected to anos depreciation w ear econom ear class life racer $175,000. The recovery a $ -280,000 What are the net operating cash flows for Year 1 and 2? Year 1 Year 2 $ 138,780 $ 158,700 What is the total value of the additional considerations at the end of the five years? $ 0 What is the Net Present Value of the replacement decision? $ 156,370 The Nelson Equipment Company purchased a machine 5 years ago at a cost of $420.000 TL machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $20,000 at the end of the 10 years. It is being depreciated by the straight-line method and a salvage value of $20,000, or by S40,000 per year A new machine can be purchased for S450,000 and require an additional $50,000 in installation costs. The new machine will require $35,000 in additional spare parts. During its 5. year life, it will reduce cash operating expenses by S175,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $10,000. ACRS dereciation will be used, and the machine will be depreciated over its 3-year class life rather than its S-year economic life. The old machine can be sold today for $50,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) 17. What is the NET COST of the machine? (That is, what is the initial cash outflow?) a. S-417.000 b. $ -553,000 $ -485,000 d. $ -382.000 $ -518,000 18. What are the net operating cash flows for Year 1 and 2? Yearl Year 2 a $ 145,000 $ 179,000 b. S 155,400 $ 179,000 c. $ 171,000 $ 195,000 d. $ 169,000 $ 205,000 $ 150,000 $ 171.000 What is the total value of the additional considerations at the end of the five years? $ 25,000 $ 41,000 -14,000 d. $ 39,000 $ 21,000 C What is the Net Present Value of the replacement decision? $ 75,413 $ 74,785 $ 76,668 d. $ 78,040 e. S 72.250 The Nelson Equipment Company purchased a machine 5 years ago at a cost of $420,000. The machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $20,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $20,000, or by $40,000 per year. A new machine can be purchased for $450.000 and require an additional $50,000 in installation costs. The new machine will require $35,000 in additional spare parts. During its 5- year life, it will reduce cash operating expenses by $175,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $10,000. ACRS depreciation will be used, and the machine will be depreciated over its 3-year class lite rather than its 5-year economic life. The old machine can be sold today for $50,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) 17. .000. The machine had an expect at the end of the $50.000, or by Ine Nelson Equipment Company purchased a machine 5 years ago at a cost of The machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $50.000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $50,000, or by $15,000 per year. A new machine can be purchased for $400,000 and require an additional $15,000 in installation costs. The new machine will require $20,000 in additional spare parts. During its 5-year life, it will reduce cash operating expenses by $150,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $50.000. ACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life. The old machine can be sold today for $175,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) What is the NET COST of the machine? (That is, what is the initial cash outflow?) are not expected to anos depreciation w ear econom ear class life racer $175,000. The recovery a $ -280,000 What are the net operating cash flows for Year 1 and 2? Year 1 Year 2 $ 138,780 $ 158,700 What is the total value of the additional considerations at the end of the five years? $ 0 What is the Net Present Value of the replacement decision? $ 156,370 The Nelson Equipment Company purchased a machine 5 years ago at a cost of $420.000 TL machine had an expected life of 10 years at the time of the purchase and an expected salvage value of $20,000 at the end of the 10 years. It is being depreciated by the straight-line method and a salvage value of $20,000, or by S40,000 per year A new machine can be purchased for S450,000 and require an additional $50,000 in installation costs. The new machine will require $35,000 in additional spare parts. During its 5. year life, it will reduce cash operating expenses by S175,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worth $10,000. ACRS dereciation will be used, and the machine will be depreciated over its 3-year class life rather than its S-year economic life. The old machine can be sold today for $50,000. The firm's tax rate is 40 percent and the appropriate discount rate is 12 percent. (The recovery allowance percentages for 3-year property are 33%, 45%, 15%, and 7%.) 17. What is the NET COST of the machine? (That is, what is the initial cash outflow?) a. S-417.000 b. $ -553,000 $ -485,000 d. $ -382.000 $ -518,000 18. What are the net operating cash flows for Year 1 and 2? Yearl Year 2 a $ 145,000 $ 179,000 b. S 155,400 $ 179,000 c. $ 171,000 $ 195,000 d. $ 169,000 $ 205,000 $ 150,000 $ 171.000 What is the total value of the additional considerations at the end of the five years? $ 25,000 $ 41,000 -14,000 d. $ 39,000 $ 21,000 C What is the Net Present Value of the replacement decision? $ 75,413 $ 74,785 $ 76,668 d. $ 78,040 e. S 72.250
