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The Everly Equipment Company's flange - lipping machine was purchased 5 years ago for $ 6 5 , 0 0 0 . It had an
The Everly Equipment Company's flangelipping machine was purchased years ago for $ It had an expected life of years when it was bought, and its remaining depreciation is $ per year for each year of its remaining life. As older flangelippers are robust and useful machines, this one can be sold for $ at the end of its useful life.
A new highefficiency, digitalcontrolled flangelipper can be purchased for $ including installation costs. During its year life, it will reduce cash operating expenses by $ per year, although it will not affect sales. The new equipment will have zero salvage value. MACRS depreciation will be used, and the machine will be depreciated over its year class life rather than its year economic life, so the applicable depreciation rates are and There will be no depreciation in its th year since it will already be fully depreciated.
The old machine can be sold today for $ The firm's tax rate is and the appropriate cost of capital is
If the new flangelipper is purchased, what is the amount of the initial cash flow at Year Hint: you need to calculate the book value of the old machine so you can calculate its aftertax salvage value. Round your answer to the nearest dollar. Cash outflow, if any, should be indicated by a minus sign.
$
What are the incremental net cash flows that will occur at the end of Years through Hint: Be sure to also include the annual depreciation tax savings and the aftertax opportunity cost of not selling the old machine at Year Do not round intermediate calculations. Round your answers to the nearest dollar. Cash outflows, if any, should be indicated by a minus sign.
CF $
CF $
CF $
CF $
CF $
What is the NPV of this project? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
$
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