Question
ROC Company has two alternatives: remodel an old car paint shop or, remove the old car paint shop and install a new one. The company
ROC Company has two alternatives: remodel an old car paint shop or, remove the old car paint shop and install a new one. The company uses a discount rate of 10%. ........................................................................New paint car shop............Old Paint car shop Annual Revenues................................................90,000................................70,000 Annual operating costs......................................(30,000)............................(25,000) Annual net cash Inflow.......................................60,000...............................45,000 Cost........................................................................300,00 Useful life............................................................10 years Replace brush at the end of 6 years................50,000 Salvage of old equipment..................................40,000 If ROC remodels the existing Paint car shop . . . Remodel cost...........................................................................................175,000 Replace brushes at the end of 6 years..................................................80,000 A) How much is the NPV for Investing the new Paint shop & remodeling the existing Paint car shop will be? B) Analyze which alternative will have a higher NPV?
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