Reference no: EM131322720
A firm is considering an investment in a new machine with a price of $18.09 million to replace its existing machine. The current machine has a book value of $6.09 million and a market value of $4.59 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 $6.79 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 $259,000 in net working capital. The required return on the investment is 11 percent, and the tax rate is 38 percent. Assume the company uses straight-line depreciation. Requirement
1. a. What is the NPV of the decision to purchase a new machine? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16). Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) NPV $
b. What is the IRR of the decision to purchase a new machine? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) IRR % Requirement
2. a. What is the NPV of the decision to purchase the old machine? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16). Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Negative amount should be indicated by a minus sign.) NPV $
b. What is the IRR of the decision to purchase the old machine? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16). Negative amount should be indicated by a minus sign.) IRR %
Identify and describe the role and purpose of the report
: Evaluate the forensic psychology and risk assessment report and create an 8- to 10-page essay in a Microsoft Word document addressing the following: Identify and describe the role and purpose of the report. Comment on whether the evaluation was or..
|
Performing an audit of needs and overall strategies
: When deciding to form a strategic partnership, the text recommends performing an audit of needs and overall strategies with regard to logistics operations. What is the goal of the audit, and what types of information should come from the audit?
|
Develop cultural intelligence
: Why is it important for today's leaders to develop cultural intelligence? Do you think a leader who has never had experience with people different from himself or herself can develop the ability to smoothly adapt to culturally different ways of t..
|
What is the npv of decision to purchase new machine
: A firm is considering an investment in a new machine with a price of $18.09 million to replace its existing machine. The current machine has a book value of $6.09 million and a market value of $4.59 million. What is the NPV of the decision to purchas..
|
What age is middle age why do you think this is the case
: First, ask yourself, and then ask the people you are interviewing, the following questions: What age is middle age? Why do you think this is the case? What are the typical physical signs of aging in middle age? What is old age? Why do you think this ..
|
Interpret factor matrix that emerged from factor analysis
: A researcher conducted a factor analysis of five items on which participants rated their current mood. Interpret the factor matrix that emerged from this factor analysis. Specifically, what do the three factors appear to be?
|
How are american airlines and comcast alike
: If you were the Director for Long Range Product Development at Boeing, would you have any interest in the product life cycle for American Airlines?
|
Discuss about the what are you communicating and its steps
: What are you communicating? Are your communications effective? A Communications Audit will answer these questions. A Communications Audit is a systematic research method, which will identify the strengths and weaknesses of your current internal an..
|