Replacement Analysis De Young Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The current machine would be wom out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $165,000. The old machine is being depreciated by $110,000 per year for each year of its remaining Ite. The new machine has a purchase price of $750,000, an estimated useful life and MACRS classife of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5,76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total, annual pre-tax savings of $195,000 will be realized if the new machine is installed. The company's marginal tax rate is 35% and the project cost of capital is 12% a. What is the initial net cash flow if the new machine is purchased and the old one is replaced? Round your answer to the nearest dollar. Cash outlow, if any, should be indicated by a minus sign b. Calculate the annual depreciation allowances for both machines, and compute the change in the annual depreciation expense if the replacement is made. Do not round intermediate calculations, Round your answers to the nearest dollar. Negative values, if any, should be indicated by a minus sign Depreciation Year Allowance, New Depreciation Allowance, Old Change in Depreciation 2 c. What are the incremental net cash flows in Years 1 through 57 Do not round Intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign. h 13: Selected End-of-Chapter Problems - Capital Budgeting: Estimating Cash c. What are the incremental net cash flows in Years 1 through 57 Do not round intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign CF2 Fs d. Should the firm purchase the new machine? Support your answer. Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign NPV: $ The firm -Select- D purchase the new machine. e. In general, how would each of the following factors affect the investment decision, and how should each be treated? 1. The expected life of the existing machine decreases If the expected life of the old machine decreases, the new machine will look Select Das cash flows attributable to the new machine would 2. The cost of capital is not constant but is increasing as Deyoung adds more projects into its capital budget for the year. The -Select capital cost should be used in the analysis. Gratele Now Save Continue Cartine without ang Replacement Analysis The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $40,000. It had an expected life of 10 years when it was bought and its remaining depreciation is $4,000 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life A new high-efficiency digital controlled flange-lipper can be purchased for $150,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $30,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless, MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $40,000. The firm's tax rate is 35%, and the appropriate cost of capital is 13%. a. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year O? Round your answer to the nearest dollar. Cash outflow, if any, should be Indicated py a minus sign. b. What are the incremental net cash flows that will occur at the end of Years 1 through 5? Do not round Intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign Ch 13: Selected End-of-Chapter Problems - Capital Budgeting: Estimating Cash and the machine will be depreciated over its 3-year class fe rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $40,000. The firm's tax rate is 35%, and the appropriate cost of capital is 13% a. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year O? Round your answer to the nearest dollar. Cash outflow, if any, should be indicated by a minus sign b. What are the incremental net cash flows that will occur at the end of Years 1 through 57 Do not round intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign. CF1 CF2 c. What is the NPV of this project? Do not round Intermediate calculations. Round your answer to the nearest whole dollar. Negative value, if any, should be indicated by a mind's sign Should Everly replace the fange-lipper? Select Replacement Analysis De Young Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The current machine would be wom out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $165,000. The old machine is being depreciated by $110,000 per year for each year of its remaining Ite. The new machine has a purchase price of $750,000, an estimated useful life and MACRS classife of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5,76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total, annual pre-tax savings of $195,000 will be realized if the new machine is installed. The company's marginal tax rate is 35% and the project cost of capital is 12% a. What is the initial net cash flow if the new machine is purchased and the old one is replaced? Round your answer to the nearest dollar. Cash outlow, if any, should be indicated by a minus sign b. Calculate the annual depreciation allowances for both machines, and compute the change in the annual depreciation expense if the replacement is made. Do not round intermediate calculations, Round your answers to the nearest dollar. Negative values, if any, should be indicated by a minus sign Depreciation Year Allowance, New Depreciation Allowance, Old Change in Depreciation 2 c. What are the incremental net cash flows in Years 1 through 57 Do not round Intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign. h 13: Selected End-of-Chapter Problems - Capital Budgeting: Estimating Cash c. What are the incremental net cash flows in Years 1 through 57 Do not round intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign CF2 Fs d. Should the firm purchase the new machine? Support your answer. Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign NPV: $ The firm -Select- D purchase the new machine. e. In general, how would each of the following factors affect the investment decision, and how should each be treated? 1. The expected life of the existing machine decreases If the expected life of the old machine decreases, the new machine will look Select Das cash flows attributable to the new machine would 2. The cost of capital is not constant but is increasing as Deyoung adds more projects into its capital budget for the year. The -Select capital cost should be used in the analysis. Gratele Now Save Continue Cartine without ang Replacement Analysis The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $40,000. It had an expected life of 10 years when it was bought and its remaining depreciation is $4,000 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life A new high-efficiency digital controlled flange-lipper can be purchased for $150,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $30,000 per year, although it will not affect sales. At the end of its useful life, the high-efficiency machine is estimated to be worthless, MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $40,000. The firm's tax rate is 35%, and the appropriate cost of capital is 13%. a. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year O? Round your answer to the nearest dollar. Cash outflow, if any, should be Indicated py a minus sign. b. What are the incremental net cash flows that will occur at the end of Years 1 through 5? Do not round Intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign Ch 13: Selected End-of-Chapter Problems - Capital Budgeting: Estimating Cash and the machine will be depreciated over its 3-year class fe rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. The old machine can be sold today for $40,000. The firm's tax rate is 35%, and the appropriate cost of capital is 13% a. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year O? Round your answer to the nearest dollar. Cash outflow, if any, should be indicated by a minus sign b. What are the incremental net cash flows that will occur at the end of Years 1 through 57 Do not round intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign. CF1 CF2 c. What is the NPV of this project? Do not round Intermediate calculations. Round your answer to the nearest whole dollar. Negative value, if any, should be indicated by a mind's sign Should Everly replace the fange-lipper? Select