Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $50,000. It had an expected life of 10 years when it was bought

image text in transcribed
image text in transcribed
The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $50,000. It had an expected life of 10 years when it was bought and its tertaining depreciation is $5,000 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for 520,000 at the end of it useful life. A new high-efficiency dightal-controlled flange-lipper can be purchased for $150,000, induding installation costs. During its 5 :year life, it will reduce cash operating expenses by $45,000 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%4 14.81%, and 7.41% The old machine can be sold today for $55,000. The firm's tax rate is 35%, and the appropriate cost of capital is 14%. a. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0 ? Round your answer to the nearest dollar, Cash outflow, if any, should be indicated by a minus sign. 5 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 outllows, if any, should be indicated by a minus sign. C. What is the NPV of this project? Do not round intermediate calculations, Round your answer to the nearest whole dollac Negative value, 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 ta thin itieireut dollar. Cash outhlows, if any, should be indicated by a minus sign. C. What is the NPV of thes project? Do not round intermediate calculations. Round your answer to the nearest whole dollac Negative value, if any, shodid be indicated by a mentis sign. 5 Should Everly replace the flange-hipper

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Sustainability

Authors: Karolina Daszyńska-Żygadło, Agnieszka Bem, Bożena Ryszawska, Erika Jáki, Taťána Hajdíková

1st Edition

3030344037, 978-3030344030

More Books

Students also viewed these Finance questions

Question

c. What groups were least represented? Why do you think this is so?

Answered: 1 week ago

Question

7. Describe phases of multicultural identity development.

Answered: 1 week ago