Should the old welder be replaced by new one

Assignment Help Financial Management
Reference no: EM132047235

 Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $84,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $26,000 to $52,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the project cost of capital is 11%.

Should the old welder be replaced by the new one?

What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest cent. $

Reference no: EM132047235

Questions Cloud

How has cvc classified those cds for accounting purposes : Cvs indicates in note 1 that it has come short in stock or bonds however Cvs health corp. how has cvc classified those CDs for accounting purposes
What is the company wacc : Assume the company’s tax rate is 40 percent. What is the company's WACC?
What was total nominal rate of return on investment : What was your total nominal rate of return on this investment over the past year?
Properties that society has found undesirable : Properties that society has found undesirable because of events that occurred there are known as:
Should the old welder be replaced by new one : Should the old welder be replaced by the new one? What is the NPV of the project?
What is its relation to the security market line : What is the capital asset pricing model (CAPM)? What is its relation to the security market line (SML)?
What is the company target debt-equity ratio : Fama's Llamas has a weighted average cost of capital of 11 percent. What is the company's target debt-equity ratio?
What was the dividend yield and the capital gains : Compute the percentage total return. What was the dividend yield? The capital gains?
Compute effective annual return : What is Avicorp's pre-tax cost of debt? Compute the effective annual return.

Reviews

Write a Review

Financial Management Questions & Answers

  Share dividend-what is the current share price

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $14 per share dividend 10 years from today ..

  Determine what you think chase is worth to you

Using the required rate of return, determine what you think Chase is worth to you (intrinsic value) if you assume a 7.65 percent growth rate.

  What is corresponding put option worth

What is the price of this call option? What is corresponding Put Option worth?

  Next two annual dividends will be in the amount

Last week, Onboard Co. has announced that the next two annual dividends will be in the amount of $2.3 and $4.19, respectively. After that, the dividends will increase by 3.6 percent annually. The required return on this stock is 12.98 percent. What i..

  Minimum annual cash inflow that firm should accept

With the given life, initial investment, and cost of capital, what is the minimum annual cash inflow that the firm should accept?

  What the beta of each stock means for that company

Choose five stocks—any five stocks you find interesting. List the company, the ticker symbol, and the percentage of your total portfolio that this stock makes up. Find and report the beta for each of the stocks in your portfolio. Discuss what the bet..

  Future value of multiple annuities

Assume that you contribute $370 per month to a retirement plan for 25 years. what is the value of your retirement plan after the 50 years?

  What annual rate of return

What annual rate of return would grandma zoe need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years?

  The pecking order of financing is followed by firms

The pecking order of financing is followed by firms is. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC. Since a firm's beta coefficient it not affected by its use of financial leverag..

  How much interest would alex pay during first year of loan

Alex Guadet of Forrest City, Arkansas, has been renting a small, two-bedroom house for several years. He pays $900 per month in rent for the home and $300 per year in property and liability insurance. The owner of the house wants to sell it, and Alex..

  Calculate linda accuracy-related penalty for negligence

Linda underpaid her taxes for the current year by $20,800 due to negligence. Calculate Linda's accuracy-related penalty for negligence.

  The price of the bond change based on duration rule

What is the duration of this bond? by how much will the price of the bond change based on duration rule?

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