User Account

All Pages

What is the irr of the replacement project

Assignment Help Accounting Basics
Reference no: EM133027198

Question - PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $145 million on equipment with an assumed life of 5 years and an assumed salvage value of $15 million for tax purposes. The firm uses straight-line depreciation. The old equipment can be sold today for $100 million. A new modem pool can be installed today for $180 million. This will have a 3-year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $27 million per year and decrease operating costs by $14 million per year. At the end of 3 years, the new equipment will be worthless. Assume the firm's tax rate is 30% and the discount rate for projects of this sort is 8%.

Required -

a. What is the net cash flow at time 0 if the old equipment is replaced?

b. What are the incremental cash flows in years (i) 1; (ii) 2; (iii) 3?

c. What is the NPV of the replacement project?

d. What is the IRR of the replacement project?

Reference no: EM133027198

Questions Cloud

Give the entry to reflect the change : A company acquired a machine for use in a business at the beginning of year 1: Cost, $110,000; Give the entry to reflect the change
Research the compensation system : The organization examples are: University of Arizona, Cisco Systems and Whole Foods. Research the compensation system of one of these organizations.
Explain the big five personality traits : Please describe each of the "Big 5" personality traits. For each trait, provide an example of how it might contribute positively to an individual's performance.
Theories of change - culture and innovation : Discuss current and future market/economic trends. You should be focusing in particular on Brexit; international trade deals
What is the irr of the replacement project : Assume the firm's tax rate is 30% and the discount rate for projects of this sort is 8%. What is the IRR of the replacement project
Explain the discount rate you would recommend : Explain the discount rate you would recommend to use when evaluating the economical valuation of the potential projects considering the policy statement stated
Determine the payback period for the project : A project requires an initial outlay of $100,000, and is expected to generate annual net cash inflows of $28,000 for the next 5 years. Determine payback period
What is Peach Corporation deduction : Expenses of temporary directors and organizational meetings $26,000. What is Peach Corporation's deduction for organizational expenditures for 2020
Recognizing employee contributions with pay : Analyze how pay influences individual employees, and the three theories that explain the effect of compensation on individuals.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare the adjusting journal entries

In relation to the above intragroup transactions prepare the adjusting journal entries for the consolidation worksheet at 30 June 2020 and 30 June 2021

  Explain what is diluted EPS

Question - Compaq Ltd has a net income after tax of $2 000 000 for the year ended 30 June 2018. Explain what is diluted EPS

  The following expenditures were incurred by obermeyer

the following expenditures were incurred by obermeyer company in purchasing land cash price 71722 accrued taxes 3898

  What are temporary and permanent accounts

What are temporary and permanent accounts? From the account listed above, choose four permanent and four temporary accounts

  Where can a master admin accountant user view

Where can a Master Admin Accountant User view the apps connected to a client's QuickBooks Online account from within QuickBooks Online Accountant?

  The small town credit union experiences

The Small town Credit Union experiences its greatest congestion on paydays from 11:30 A.M. until 1:00 P.M. During these rush periods, customers arrive according to a Poisson process at rate 2.1 per minute.

  What effect do subsidiary treasury stock holdings

What are the advantages of acquiring the majority of the voting shares of another company rather than acquiring all of its voting stock?

  For each of the following situations use the weighted

for each of the following situations use the weighted average method to determine the equivalent units of production

  Identify five disclosures required by ifrs for contracts

Describe the different measurement bases that are included in the IFRS Conceptual Framework. Identify five disclosures required by IFRS 15 for contracts

  Prepare a bank reconciliation for the msi checking account

Prepare a bank reconciliation for the MSI checking account at December 31, 2016. You will have to compute the balance per books

  Calculate the nominal annual yield compounded half-yearly

Calculate the nominal annual yield compounded half-yearly that Biti Bank realised. You may give your answer as a percentage per annum to the nearest percent

  Compute the cost of the ending inventory and the cost of

jones company had 115 units in beginning inventory at a total cost of 12650. the company purchased 220 units at a total

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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