Calculate the npv of this replacement project

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Dickerson, Inc. is considering the replacement of an old machine. The old machine (purchased 5 years ago) has an expected remaining useful life of 4 years. The firm could sell it for $60,000 today or $10,000 in 4 years. New machine costs $280,000 with 4 years of useful life and a salvage value of $18,000. Assume straight line depreciation for both assets. New machine will increase sales by $85,000, $90,000, $80,000, and $70,000 in the next 4 years. Firm must invest $5,000 in NWC today, and then NWC must be maintained at 10% of sales. The discount rate is 11%, and the tax rate is 40%. Calculate the NPV of this replacement project.

Reference no: EM132596419

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