Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Select Comfort Company purchased a mattress-stuffing machine 5 years ago for $70,000. When purchased it had an estimated salvage value of $5,000 at the
The Select Comfort Company purchased a mattress-stuffing machine 5 years ago for $70,000. When purchased it had an estimated salvage value of $5,000 at the end of seven years. Last year, the mattress machine was overhauled at a cost of $3,000. The ofd machine can be sold today for $20,000. A new machine can be purchased for $69,300. It has a 2 -year life and is expected to reduce operating expenses by $50,000 per year. After 2 years, the new machine can be sold for $20,000. The company's cost of capital is 9% and the tax rate is 35%. Assume that depreciation is not tax deductible. Answer the following questions. What are the initial cash flows? (Answer in dollars and round to the nearest dollar.) $ What are the operating cash flows at the end of the first year? (Answer in dollars and round to the nearest dollar.) What are the torminal year cash flows? (Answer in dollars and round to the nearest dollar.) What is the npv of the replacement cash flows? (Answer in dollars and round to the nearest dollar.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started