Determining the net present value of bull gator industries

Reference no: EM13767693

Bull Gator Industries is considering a new assembly line costing $6,000,000. The assembly line will be fully depreciated by the simplified straight line method over its 5 year depreciable life. Operating costs of the new machine are expected to be $1,100,000 per year. The existing assembly line has 5 years remaining before it will be fully depreciated and has a net book value of $3,000,000. If sold today the company would receive $2,400,000 for the existing machine. Annual operating costs on the existing machine are $2,100,000 per year. Bull Gator is in the 46 percent marginal tax bracket and has a required rate of return of 12 percent.

Required:

Calculate the net present value of replacing the existing machine.

Reference no: EM13767693

Questions Cloud

In relation to the efficient market hypothesis : Stock prices fluctuate daily. In relation to the efficient market hypothesis, these fluctuations are:

Viruses and vaccines related problems : What are the possible effects to individuals and the community of not vaccinating for diseases?

Pro forma income statement for the final quarter : The total depreciation expense for the period will be $8,775. An interest payment on outstanding debt of $15,000 will be made in December. Using the information given, construct a pro forma income statement for the final quarter of 2004 for Parker..

Assume a municipal bond-what is the yield to call : Assume a municipal bond has 18 years until maturity and sells for $5.640 It has a coupon rate of 5.70 percent and it can be called in 10 years. What is the yield to call if the call price is 110 percent of par?

Determining the net present value of bull gator industries : Bull Gator Industries is considering a new assembly line costing $6,000,000. The assembly line will be fully depreciated by the simplified straight line method over its 5 year depreciable life

Analyst will make regarding the investment opportunity : An analyst evaluting the North facility expects that the project will be financed by debt that costs the firm 7%. What recommendation do you think this analyst will make regarding the investment opportunity? Another analyst assigned to study the Sout..

Explain the process from stabilizing this particular crisis : Explain the process from stabilizing this particular crisis to ongoing measures taken to maintain the individual's stability. What treatment plan would you use to identify the type of treatment you believe is best in this case? Explain

Demonstrate the understanding of the classical approaches : Describe the management process and identify the skills required to manage business organizations - Demonstrate the understanding of the classical approaches to management and the foundations of modern management thinking.

Future climate changes conditions : Describe the environmental conditions that occurred during the last decade. Speculate about the future climate changes that may occur.

User Account

All Pages