Incremental analysis, Andrusco Corp's new vice president of

Incremental analysis

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Reference no: EM13803322

Andrusco Corp's new vice president of Finance, Mr Rufus, has discovered that a production machine authorized for purchase last year y his fired predecessor Mr. Miranda, is not functioning well on the production floor. Therefore he has decided and received approval to replace this machine with a new one. The new machine will cost 50,000, has a 5 year economic life, will use DDB depreciation and a residual value of 5,000$. The old machine was using SYD depuration with a 5 year life with 2000$ salvage value and originally cost 40,000. The old machine can be sold in today’s market for 30,000. The US president has wisely reinstituted the Investment Tax Credit for corporations that had been outlawed. New unadjusted cash flows from the new equipment will be 20,000; 10,000; 10,000; 10,000; and 15,000. Maintenance cost will be 1000 in both years 2 and 4. A commercial crane will have to be hired to place the new equipment on t he shop floor to the tune of 2500. This is incremental analysis. Preferred stock is sold at 39.875 with a par of 1$. Last dividend was 3.5 cents per share. What is the NPV

Reference no: EM13803322

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