Reference no: EM13271438
A firm is considering an investment in a new machine with a price of $18.18 million to replace its existing machine. The current machine has a book value of $6.18 million and a market value of $4.68 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 $6.88 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 $268,000 in net working capital. The required return on the investment is 11 percent, and the tax rate is 39 percent.
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.)
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))
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.)
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.)
|
What is jack weighted average cost of capital
: The U.S. Treasury bill is yielding 5 percent and the market risk premium is 8 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?
|
|
Explain light travels extremely rapidly
: Light travels extremely rapidly (c = 3.00×10^8 m/s ). Suppose you had to travel 20 miles to work every day. If you traveled at the speed of light for the entire trip, how long would it take you to get to work (in seconds)? [1 mile = 1.61km]
|
|
Number of different risk management models
: There are a number of different Risk Management Models, select one and fully discuss its strengths and weaknesses. What type of organization would be suitable for its use? unsuitable for its use?
|
|
Explain is method b better than method a or not and why
: If a given modulation method A requires higher Eb/No ratio for a given probability of error compared with another modulation method B, is method B better than method A or not, and why
|
|
What is the npv of the decision to purchase a new machine
: 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.)
|
|
Addiction plays within a particular culture
: Culture refers to a reference group to which an individual connects. For instance, one may identify by race, sex, sexual orientation, heritage, military, civilian, etc. For this activity, you will explore the role that addiction plays within a partic..
|
|
What is the balloon new radius
: Suppose you have a spherical balloon filled with air at room temperature and 1.0 atm pressure; its radius is 18cm, what's the balloon's new radius
|
|
Determine min bw of noiseless channel to transmit zero isi
: A data transmission system uses 16-ary(16 levels) base band signaling. A.) determine the minimum BW of a noiseless channel to transmit at 12,000 bits/sec with zero ISI. B.) Explain what pulse shaping(channel shaping) would be required above and wh..
|
|
Find out the how many grams will crystallize
: Any help on this problem would be appreciated! Not quite sure how to to use the solubility values in this problem. How can we determine the how many grams will crystallize
|