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Calculate the NPV if you keep the old machine.

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INFORMATION OLD MACHINE;Original Purchase Price $ 550,000.00;Original Life 10 YEARS;Remaining Life 5 YEARS;Straight line depreciation in use;Salvage Value $ 50,000.00;Current Fair Market Value $ 260,000.00;INFORMATION NEW MACHINE A;Purchase Price $895,000.00;Estimated Life 5 YEARS;Use Straight Line Depreciation Method;Estimated Salvage Value $ 10,000.00;Estimated Net Operating Cash Flow Increase/Decrease (Prior to Depreciation and Taxes);End of Year 1 $ 100,000.00;End of Year 2 $ 150,000.00;End of Year 3 $ 250,000.00;End of Year 4 $ 200,000.00;End of Year 5 $ 200,000.00;ASSUMPTIONS;Tax Rate 40%;WACC Rate 7%;1.;Calculate the NPV if you keep the old machine. (Round up to the nearest dollar amount. DO NOT use $, commas, or decimal points) (Example $23,345.50 is entered as 23346);2.;Calculate the NPV if you sell the old machine and buy new machine A. (Round up to the nearest dollar amount. DO NOT use $, commas, or decimal points) (Example $23,345.50 is entered as 23346);3.;What decision do you suggest?;A) Keep the old machine and do not buy the new machine.;B) Sell the old machine and buy the new machine.;4.;List 3 risk factors that could change your answers above.

 

Paper#23799 | Written in 18-Jul-2015

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