Assume that the new machine will realize annual operating

Reference no: EM13573553

Ten years ago Treece Manufacturing bought equipment for their copper/bronze division at their production facility. They paid $1,460,000, it had an expected salvage value of $240,000, and an economic life of eighteen eyars. The old machine could be used for another eight years, and at that point the company asumes that it would have $0 salvage value. After using the old machine for ten years, it now can be sold for $360,000. They are considering replacing the old equipment.

The new equipment would ahve a cost of $2,280,000, a slavage value of $350,000, and an ecnomoic life of 8 years. With the new machine the company would realize and increase in their current assets of $90,000 and an increase in their current laiblities of $41,000. It will be returned at the end of the equipment's 8 year life.

Assume that the new machine will realize annual operating cost of $310,000, while the old machine pays operating cost of $543,000 Assume that the company has a tax rate of 31%. Assume at the end of the 8 year life the new equipment will sell for 350,000. Determine the cash flows involved to calculate the NPV and the IRR for the new project.

Cassh Flows____________________________________________________________________________________

Reference no: EM13573553

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