Time Remaining: 03:59:21 Question 1 of 3 Hide Time Remaining A 35 Points A Question Prog Click to see additional instructions Holliday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.25 million and requires installation costs of $143.000. The existing machine can be sold currently for $187.000 before taxes. It is 2 years old. cost $809.000 new, and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5-year recovery period and therefore has the final 4 years of depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5 will be 50. Over its 5-year life, the new machine should reduce operating costs by $357,000 per year. The new machine will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for 5191.000 net of removal and cleanup costs at the end of 5 years. An increased investment in net working capital of $30,000 will be needed to support operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9.5% cost of capital and is subject to a 40% tax rate. a. Develop the net cash flows needed to analyze the proposed replacement. b. Determine the net present value (NPV) of the proposal c. Determine the internal rate of return (IRR) of the proposal d. Make a recommendation to accept or reject the replacement proposal and justify your answer e. What is the highest cost of capital that the firm could have and still accept the proposal Chat yazin 7, Hii sites Recep Do Time Remaining: 03:59:12 A Hide Time Remaining A Calculate the initial investment: (Round to the nearest dollar.) Cost of the new machines Installation costs Installed cost of new assets Proceeds from sale of existing machines Tax on sale of existing machine Total after tax proceeds from sales Increase in net working capital Initial investments Calculate the operating cash flows from the existing machine: (Round to the nearest dollar.) Operating cash inflows Year 1:3 Operating cash inflows Year 2.5 Operating cash inflows Year 3:5 Chat O *, sites Recep Dok Time Remaining: 03:58:56 A Hide Time Remaining A Year 1:5 Year 2:5 Year 3: Year 4: 5 Year S: $ Year 6: 5 Calculate the terminal cash flow: (Round to the nearest dollar.) Proceeds from sale of new assets Tax on sale of new asset ! Total proceeds sale of new assets Change in net working capital Terminal cash flow 5 Chat Sites Recep Dog Time Remaining: 03:59:04 A Hide Time Remaining A Operating g cash inflows Year 2:5 Operating cash inflows Year 3:5 Operating cash inflows Year 4: $ Operating cash inflows. Year 5: $ Operating cash inflows. Year 6: $ Calculate the operating cash flows from the new machine: (Round to the nearest dollar.) Operating cash inflows Year 1:5 Operating cash inflows Year 2:5 Operating cash inflows Year 3:5 Operating cash inflows Year 4:5 Operating cash inflows Year 5:5 Operating cash inflows Year 0:3 Calculate the incremental Cash Flows: (Round to the nearest dollar) Chat Sites Recep Dog Time Remaining:03:58:49 A Hide Time Remaining A Terminal cash flows b. The net present value is $ (Round to the nearest dollar.) c. The internal rate of return is %. (Round to one decimal place.) d. Make a recommendation to accept or reject the replacement proposat1 for Accepto for Reject: e. The highest cost of capital that the firm could have and still accept the proposal is 6. Round to one decimal place.) NER Save Chat o in buraya yatan Time Remaining: 03:59:21 Question 1 of 3 Hide Time Remaining A 35 Points A Question Prog Click to see additional instructions Holliday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.25 million and requires installation costs of $143.000. The existing machine can be sold currently for $187.000 before taxes. It is 2 years old. cost $809.000 new, and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5-year recovery period and therefore has the final 4 years of depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5 will be 50. Over its 5-year life, the new machine should reduce operating costs by $357,000 per year. The new machine will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for 5191.000 net of removal and cleanup costs at the end of 5 years. An increased investment in net working capital of $30,000 will be needed to support operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9.5% cost of capital and is subject to a 40% tax rate. a. Develop the net cash flows needed to analyze the proposed replacement. b. Determine the net present value (NPV) of the proposal c. Determine the internal rate of return (IRR) of the proposal d. Make a recommendation to accept or reject the replacement proposal and justify your answer e. What is the highest cost of capital that the firm could have and still accept the proposal Chat yazin 7, Hii sites Recep Do Time Remaining: 03:59:12 A Hide Time Remaining A Calculate the initial investment: (Round to the nearest dollar.) Cost of the new machines Installation costs Installed cost of new assets Proceeds from sale of existing machines Tax on sale of existing machine Total after tax proceeds from sales Increase in net working capital Initial investments Calculate the operating cash flows from the existing machine: (Round to the nearest dollar.) Operating cash inflows Year 1:3 Operating cash inflows Year 2.5 Operating cash inflows Year 3:5 Chat O *, sites Recep Dok Time Remaining: 03:58:56 A Hide Time Remaining A Year 1:5 Year 2:5 Year 3: Year 4: 5 Year S: $ Year 6: 5 Calculate the terminal cash flow: (Round to the nearest dollar.) Proceeds from sale of new assets Tax on sale of new asset ! Total proceeds sale of new assets Change in net working capital Terminal cash flow 5 Chat Sites Recep Dog Time Remaining: 03:59:04 A Hide Time Remaining A Operating g cash inflows Year 2:5 Operating cash inflows Year 3:5 Operating cash inflows Year 4: $ Operating cash inflows. Year 5: $ Operating cash inflows. Year 6: $ Calculate the operating cash flows from the new machine: (Round to the nearest dollar.) Operating cash inflows Year 1:5 Operating cash inflows Year 2:5 Operating cash inflows Year 3:5 Operating cash inflows Year 4:5 Operating cash inflows Year 5:5 Operating cash inflows Year 0:3 Calculate the incremental Cash Flows: (Round to the nearest dollar) Chat Sites Recep Dog Time Remaining:03:58:49 A Hide Time Remaining A Terminal cash flows b. The net present value is $ (Round to the nearest dollar.) c. The internal rate of return is %. (Round to one decimal place.) d. Make a recommendation to accept or reject the replacement proposat1 for Accepto for Reject: e. The highest cost of capital that the firm could have and still accept the proposal is 6. Round to one decimal place.) NER Save Chat o in buraya yatan