Reference no: EM133069102
The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life.
Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $11,000, and has an estimated useful life of 6 years with an estimated salvage value of $1,100. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, the new machine's much greater efficiency would reduce operating expenses by $1,500 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-state tax rate is 40%, and its WACC is 16%.
Should the steamer be replaced?
What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
|
What option hedge strategy will create
: Dose Pharma Limited is facing a court dispute on the side effects of its Coved19 vaccines. As the judgement day is approaching soon, it will have 5,000 shares o
|
|
Business current financial health
: Explain what the results of your calculations and your comparison indicate about the business's current financial health, providing examples to support your exp
|
|
Microfinance industry in country
: Since inception the microfinance industry has been subjected to a range of criticisms. In Assessment 2 you researched the operation of microfinance in two diffe
|
|
What is the amount of inventory purchase
: Metro reported the following information in its financial statements: What is the amount of inventory purchase during the current year
|
|
What is the npv of the project
: The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life.
|
|
Intrinsic value of equity share of varad ltd
: The current dividend of Varad Limited is Rs 3.00. Varad limited is expected to enjoy an above normal growth rate at 10 percent for a period of 3 years.
|
|
Determine the expected covariance of returns
: The Sunrise and Sunset companies have the following probability distribution of returns. Economic Condition Probability Sunrise Return (%) Sunrise Return (%) Hi
|
|
What is the expected return on investment
: You are considering a particular investment, the performance of which is dependent upon the overall economy. If the economy is strong, you expect a return on yo
|
|
Expected dividend growth rate
: SloMo is a camera manufacturer that recently listed its shares for trading on the stock exchange. At the time of the listing, investors expected the firm to pay
|