What is the npv of the new production line

Assignment Help Finance Basics

Reference no: EM13264979

ACME Manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost $1 million, have a five-year life, and be depreciated using MACRS over three years. At the end of five years, the new line could be sold as scrap for $150,000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a savings of $40,000 per year before tax and unadjusted for inflation (in today's dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $110,000 per year (in today's dollars). If ACME invests in the new line, a one-time investment of $10,000 in additional working capital will be required. The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of inflation is 4.90 percent. What is the NPV of the new production line?

Reference no: EM13264979

Questions Cloud

What is the maximum power this plant can produce : A town is planning on using the water flowing through a river at a rate of 5.0 x 106 kg/s to carry away heat from a new power plant, What is the maximum power this plant can produce

What value of r will result in a critically damped response : The resistance, inductance, and capacitance in a parallel RLC circuit are 2000 Ohms, 250 mH, and 10 nF, respectively. a) calculate the roots of the characteristic equation that describe the voltage response of the circuit.b) Will the response be over..

Determine the entropy change of the water : A large block of copper initially at 20.0oC is placed in vat of hot water (80.0oC). For the first 1.0 J of heat that flows from the water into the block, find the entropy change of the water

What is the minimum sampling frequency to sample the signal : A bandlimited signal with maximum frequency of 3.3 kHz, what is the minimum sampling frequency to sample this signal If a sinusoidal signal of 7 kHz is sampled by this sampling frequency, what is the frequency of the alias.

What is the npv of the new production line : The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of inflation is 4.90 percent. What is the NPV of the new production line?

Achieving both excellence-service in moral-efficient manner : This needs to be at least 500 words in length. What role does structure play in achieving both excellence and service in a moral and efficient manner?

What is the thermal conductivity of this metal : A metal rod with a diameter of 2.30 cm and length of 1.10 m has one end immersed in ice at 32oF, what is the thermal conductivity of this metal and Identify the metal

Determine the cut-off frequency of the anti-aliasing filters : Explanation of the circuit: Two opamps on the top are the buffer amplifiers before and after sampler. Sampler is a JFET used as analog switch; its gate is driven by the narrow pulse train as specified above. There are two identical active lowpass ..

What is the inventory forecast for next year : The company expects sales of 300 million during the currrent year, and it expects sales to grow by 32% next year. What is the inventory forecast for next year? All dollars are in millions.

User Account

All Pages