Five years ago, NANOTech, Inc. bought an mainframe for P580,000. It was to enjoy a useful life of 15 years and a salvage value of 10% of its original cost. On its tenth year, the firm plans to buy a new mainframe to meet its growing computing needs – the projected amount for its acquisition is P870,000. If the old mainframe will be sold on its tenth year, how much should the firm raise in order to purchase the new mainframe? Use SUM OF THE YEARS DIGITS METHOD (SYD) method

Five years ago, NANOTech, Inc. bought an mainframe for P580,000. It was to enjoy a useful life of 15 years and a salvage value of 10% of its original cost. On its tenth year, the firm plans to buy a new mainframe to meet its growing computing needs – the projected amount for its acquisition is P870,000. If the old mainframe will be sold on its tenth year, how much should the firm raise in order to purchase the new mainframe? Use SUM OF THE YEARS DIGITS METHOD (SYD) method

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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The great tech company is considering replacing one of its machines with a more efficient one. The old machine has a book value of $60,000 and a remaining useful life of 5 years. It can sell the old machine now for $ 265,000. The old machine is being depreciated by 120,000 per year straight line. The new machine has a purchase price of $ 1,175,000 an estimated useful life and 5 years MACRS class life and salvage value of $145,000. Annual economic savings is $255,000 if new machine is installed. Taxes 35% and WACC is 12. Calculate the NPV and IRR of the project and make a decision on accepting the project and why? If expected life of existing machine decreased what effect does this have on the cash flow, discuss only? No calculations needed, just discuss.
Subject: Engineering Economy Problem: Five years ago, NANOTech, Inc. bought an mainframe for P580,000. It was to enjoy a useful life of 15 years and a salvage value of 10% of its original cost. On its tenth year, the firm plans to buy a new mainframe to meet its growing computing needs – the projected amount for its acquisition is P870,000. If the old mainframe will be sold on its tenth year, how much should the firm raise in order to purchase the new mainframe? Use SYD method
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