What is the npv of buying the new machine

Reference no: EM13282950

UniTech Inc. is considering purchasing a new piece of machinery. The old machine, which was purchased 3 years ago for $5 million, has been depreciated straight-line over 5 years to a salvage value of $0. The old machine can currently be sold for $2 million. The new machine, which costs $10 million, will be depreciated over 5 years to a salvage value of $2 million. Revenues from the new machine are expected to be $2.5 million in year 1 and to then grow at a rate of 5% annually. Variable costs are 40% of each year's revenue, and fixed costs are $500,000 annually. Working capital is 10% of next year's revenue. Assuming the firm has a 35% income tax and 10% cost of capital, what is the NPV of buying the new machine?

Reference no: EM13282950

Questions Cloud

Evaluate the psychological and physical treatment of suspect : Prepare a 500 word analysis in which you indentify and describe statutory authority and responsibilities of justice system officals, security personal, and private citizens regarding investigative detention and the arrest of suspected offenders.

Discuss dividend policy : Discuss dividend policy, stock repurchases, and stock splits. Also discuss how investors react differently if their company issues dividends or announces a stock split or stock repurchase.

What design modification could be done to the procedure : Construct an inverting Dc integrator circuit using a jumperwire to act as the switch across the feedback capacitor. Notice that the input voltage is 0 V, so the output voltage shouldnot change, even after the switch is opened.

Compute how much caffeine in dichloromethane extraction : Caffeine has a distribution of 4.6 between water and dichloromethane. Calculate how much caffeine (I used 0.5283g of caffeine) is extracted per each 6ml dichloromethane extraction.

What is the npv of buying the new machine : Assuming the firm has a 35% income tax and 10% cost of capital, what is the NPV of buying the new machine?

Find what is the magnitude of the magnetic force acting : The particle moves through one-quarter of a circle in a time of2.30E-3 s, at which time it leaves the field heading due south. All during the motion the particle moves perpendicular to the magnetic field. What is the magnitude of the magnetic force..

Would you recognize the interest and principal payments : Suppose you finance a project partly with debt. You should neither subtract the debt proceeds from the required investment, nor would you recognize the interest and principal payments on the debt as cash outflows.

Determine the mass of the helium : A 10-cm-diameter cylinder of helium gas is 20 cm long and at 20°C. The pressure gauge reads 120 psi. what is the mass of the helium

What is the npv of the project in swiss francs : Convert the projected franc flows into dollar flows and calculate the NPV.(Enter your answer in thousands of dollars, not in millions. (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g...

User Account

All Pages