After-tax cash inflow expected from liquidation

Assignment Help Financial Accounting

Reference no: EM13826304

Expansion versus replacement cash flows Edison Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the table below.

Project A Project B

Initial investment $40,000 $12,000a

Year Operating cash inflows

1 $10,000 $ 6,000

2 12,000 6,000

3 14,000 6,000

4 16,000 6,000

5 10,000 6,000

a. After-tax cash inflow expected from liquidation.

a. If project A were actually a replacement for project B and the $12,000 initial investment shown for project B were the after-tax cash inflow expected from liquidating it, what would be the relevant cash flows for this replacement decision?

b. How can an expansion decision such as project A be viewed as a special form of a replacement decision? Explain.

Reference no: EM13826304

Questions Cloud

Initial investment-calculate the initial investment : Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $20,000; it was being depreciated under MACRS using a 5-yea..

Write a critique of the strengths and weaknesses : Write a ‘critique' of the strengths and weaknesses an existing environmental policy statement. The policy or plan may be derived from government, business or a community organization (e.g. Conservation Council) and may be a comprehensive document ..

Report on sustainable fashion by timberland : Report On Sustainable Fashion By Timberland

What is the origin and purpose of the taa program : These questions from economics and the questions deal with international trade. Abraham Lincoln's quote on buying goods from foreign country has been discussed.

After-tax cash inflow expected from liquidation : Expansion versus replacement cash flows Edison Systems has estimated the cash flows over the 5-year lives for two projects, A and B. After-tax cash inflow expected from liquidation. If project A were actually a replacement for project B and the $12,0..

Irrelevant to the value of the firm : It can be argued that whether a company pays or does not pay dividends; it is irrelevant to the value of the firm. State some of those arguments do you concur with these arguments or do you disagree?

Models of automatic dishwashers : DeMarcus Industries manufactures a widget used in several models of its automatic dishwashers. Monthly production costs for 5,000 units are:

Which a multi-metaphor analysis of the situation is required : This problem belongs to Business Management and it deals with a managerial situation or problem or event which a multi-metaphor analysis of the situation is required. Metaphors have been part of literature since times immemorial

Calculate the payback period for the proposed investment : Payback, NPV, and IRR Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. Calculate the payback period for the proposed investment. Calculate the net present value (NPV) ..

User Account

All Pages