Solution-Npv of the decision to purchase a new machine

Npv of the decision to purchase a new machine

Assignment Help Corporate Finance

Reference no: EM13193262

A firm is considering an investment in a new machine with a price of $18 million to replace its existing machine. The current machine has a book value of $6 million and a market value of $4.5 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 $6.7 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 $250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 39 percent.

Requirement 1:

a. What is the NPV of the decision to purchase a new machine?

b. What is the IRR of the decision to purchase a new machine?

a. What is the NPV of the decision to purchase the old machine?

b. What is the IRR of the decision to purchase the old machine?

Reference no: EM13193262

Questions Cloud

Hire by committee - make sure recruits talk to their future : What do you think should be added to the list? Is there anything on the list that you disagree with? Please support your opinion with evidence from our readings and also from your own work and life experience. Please also remember to respond to your ..

State proteins rich in disulfide bonds often require longer : Proteins rich in disulfide bonds often require longer incubation times at higher temperatures before they denature. Why?

Jack lives behind train depot in cheap-old rental house : Jack lives behind the train depot in a cheap, old rental house. He gets a lot of colds and he thinks it is because of a buildup of germs over the years in the house. The most likely cause of Jack's recurrent minor illnesses is/are

Criminology maintains-crimes result from rational choices : criminology maintains that crimes result from rational choices. The argument that criminals are born criminal was purported by, The argument that crime is a natural part of social life was set forth by

Npv of the decision to purchase a new machine : What is the NPV of the decision to purchase a new machine and what is the IRR of the decision to purchase a new machine?

State the concentration of the alcl3 solution : The concentration of the AlCl3 solution is Blank 1M. AlCl3 + 3AgNO3 ---> 3AgCl + Al(NO3)3 Write answer to three significant figures in decimal form(NOT in scientific notation)

Distribution in the chancery court estate process : In Mississippi do creditors have priority over beneficiaries in a wrongful death settlement assets distribution in the Chancery Court estate process

Explain how the structure of a peptide bond : Circle the form in which a peptide bond is typically found. Describe how the structure of a peptide bond affects protein structure.

Prohibit colonial expansion : The British government's attempt to prohibit colonial expansion across the. Appalachian Mountains aroused colonial anger and de?ance of the law

User Account

All Pages

Npv of the decision to purchase a new machine

Reference no: EM13193262

Reference no: EM13193262

Questions Cloud

Reviews

Write a Review

Corporate Finance Questions & Answers

Impact of the global economic crisis on business environment

Explain the short and the long-run effects on real output

Examine the requirements for measuring assets

Financial analysis report driven by rigorous ratio analysis

Calculate the value of the merged company

Stock market project

Write paper on financial analysis and business analysis

Intermediate finance

Average price-earnings ratio

Determine the financial consequences

Prepare a spread sheet model

Principles and tools for financial decision-making

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT