Find and calculate the npv of the replacement decision

Assignment Help Financial Accounting
Reference no: EM132741419

Problem 1: The Rodriguez Company's flange-lipping machine was purchased 5 years ago for $55,000. The machine was depreciated straight line to zero over its 10-year expected life. As old flange-lippers are robust and useful machines, it can be sold today for $35,000 and it can be sold for $20,000 at the end of its operating life. A new high-efficiency, digital-controlled machine can be purchased for an installed price of $120,000. During its 5-year life, it is expected to reduce annual operating expenses by $30,000 and to be worthless at the end of its expected life. The machine will be depreciated over its 5-year MACRS class life so the applicable rates are 20.00%, 32.00%, 19.20% and 11.52%, 11.52%, and 5.76%. The firm's marginal tax rate is 25% and the project cost of capital is 16%. What is the operating and terminal cash flows in Year 5 needed to calculate the NPV of this replacement decision?

Group of answer choices

Option 1: $11,309

Option 2: $39,581

Option 3: $12,684

Option 4: None of the other answers is correct

Option 5: $41,309

Reference no: EM132741419

Questions Cloud

The significance of context : Consider the accumulated sources of error and the different factors affecting our reasoning styles.
Journalize the entries to record receipt of the note : Journalize the entries to record the following: (1) receipt of the note by Bork Furniture and (2) receipt of payment of the note at maturity
How may the marketing concept be explained : How may the marketing concept be explained? Is it applicable to an engineering firm?
Explain why the strategy might be effective : Identify a strategy social work administrators might use to address one of the challenges your colleague identified, and explain why this strategy might.
Find and calculate the npv of the replacement decision : The project cost of capital is 16%. What is the operating and terminal cash flows in Year 5 needed to calculate the NPV of this replacement decision?
What do you mean by operation : What do you mean by operation? Does this term cover production of farm product?
Determine what the net income would have been : Determine what the net income would have been if the allowance method had been used and the company estimated that 1% of sales would be uncollectible
Test the disaster recovery plan : You have been asking to test the disaster recovery plan for a small business in your area. the company has a backup plan that is well documented.
What are the types of transformation process : What are the types of transformation process? In what way are they similar and different?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Choose a public company in the food industry

Analyze the financial statements and assess whether the financial performance has improved or declined year-over-year.

  What is desired inventory

Company projects the next period sales will be 12,000 units. Company desires ending inventory equal to 20% of next month's sales. What is desired inventory? Also, if the beginning inventory is 100, and the current months sales are 14,000, what is the..

  Discuss between the fair value and equity methods

What are the difference between the fair value and equity methods of accounting for investments. In what situations would an accountant use one method

  Martin retired in may 2011 his pension is 1000 per month

martin retired in may 2011. his pension is 1000 per month from a qualified retirement plan to which is added 48000 and

  Partial income statement account balances

The following are partial income statement account balances taken from the December 31, 2016, year-end trial balance of White and Sons, Inc.: restructuring costs, $450,000; interest revenue, $55,000; before-tax loss on discontinued operations, $550,0..

  Prepare journal entries to record events for pronghorn corp

Prepare the journal entries to record these events. Pronghorn Corporation issued 4,700, five year, 3% bonds at 106 on January 1, 2020.

  Explain meaning and purpose of a profit and loss statement

Explain the meaning and purpose of a profit and loss statement and what is the formula used for the preparation of a profit and loss statement?

  Calculate and record accrued insurance expense on the loan

ACC506 accounting fundamental-University of the Sunshine Coast-Australia-Calculate and record accrued insurance expense on the loan given an interest rate.

  What happens to the property at the problems horizon

Sam, the youngest of four, will graduate in industrial engineering this June. His future plans have not solidified yet, but his parents clearly believe that he will be self-supporting. In fact, they are planning on selling their home, taking a world ..

  Prepare a loan amortization table

required the annual repayment that Newgen hotel must infect every 31st dec and prepare a loan amortization table

  What was net income or net loss for the year

If owner's drawings exceeded owner's investment made during this period, then what was Net Income or Net Loss for the year?

  Prepare a corrected classified balance sheet

Indicate the errors in this Balance Sheet by preparing a corrected Classified Balance Sheet with all required information - Land has an original cost

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd