Firm is considering an investment in new machine

Assignment Help Financial Management
Reference no: EM131831168

A firm is considering an investment in a new machine with a price of $18.03 million to replace its existing machine. The current machine has a book value of $6.03 million and a market value of $4.53 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.73 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $253,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 38 percent. Assume the company uses straight-line depreciation. What is the NPV of the decision to purchase a new machine? What is the IRR of the decision to purchase a new machine? What is the NPV of the decision to keep the old machine? What is the IRR of the decision to keep the old machine?

Reference no: EM131831168

Questions Cloud

How much net income did the firm earn during the year : During 2014, BBB paid out $33,525 of common dividends. How much net income did the firm earn during the year?
Company add or subtract to achieve the target debt ratio : The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio?
Calculating the number of periods and present value : Calculating the Number of Periods/Present Value. You are trying to save to buy a new $28,000 Volkswagen.
The new estimated value of rolen preferred stock : Preferred Stock Valuation Several years ago, What would be the new estimated value of Rolen's preferred stock?
Firm is considering an investment in new machine : A firm is considering an investment in a new machine with a price of $18.03 million to replace its existing machine.
Calculate the growth rate in dividends : Calculate the growth rate in dividends. Calculate the expected dividend yield.
All companies have cost of capital : All companies have a cost of capital and you do as well on a personal level. How are you basing answer or what are you measuring it against?
Calculate the npv of this project : RightPrice Investors, Inc., is considering the purchase of a $371,000 computer with an economic life of four years. Calculate the NPV of this project.
What is the present value of the cost of leasing : What is the present value of the cost of leasing? Is it cheaper to buy or lease?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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