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ABC company is considering replacing their old manual loading machine with an automatic loading machine. The manual machine cost $300,000 three years ago, and is being
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- The Sumitomo Chemical Corporation is considering replacing a 5-year-old machine that originally cost $50,000 and can be sold for $60,000. This machine is totally depreciated. The replacement machine would cost $125,000 and have a 5-year expected life over which it would be depreciated down using the straight-line method and have no salvage value at the end of five years. The new machine would produce savings before depreciation and taxes of $45,000 per year. Assuming a 34 percent marginal tax rate and a required return of 10%, calculate The internal rate of return and the net present value. Please show work in Excel.The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newerand more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years.The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell itnow to another firm in the industry for $265,000. The old machine is being depreciated toward a zerosalvage value, or by $120,000 per year, using the straight-line method. The new machine has a purchaseprice of $1,175,000, an estimated useful life 6 year and fall under 5 years MACRS, and an estimated salvagevalue of $145,000. The applicable depreciation rates are 20 percent, 32 percent, 19 percent, 12 percent, 11percent, and 6 percent. It is expected to economize on electric power usage, labor, and repair costs, as well asto reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the newmachine is installed. The company’s…The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $250,000. The old machine is being depreciated by $110,000 per year, using the straight-line method. The new machine has a purchase price of $1,100,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $160,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $245,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC. a. What initial cash…
- The Container Corporation of America is considering replacing an automatic painting machine purchased 9 years ago for $700,000. It has a market value today of $40,000. The unit costs $350,000 annually to operate and maintain. A new unit can be purchased for $800,000 and will have annual O&M costs of $120,000. If the old unit is retained, it will have no salvage value at the end of its remaining life of 10 years. The new unit, if purchased, will have a salvage value of $100,000 in 10 years. Using an EUAC measure and a MARR of 20% should the automatic painting machine be replaced if the old automatic painting machine is taken as a trade-in for its market value of $40,000? Solve, a. Use the cash flow approach (insider’s viewpoint approach). b. Use the opportunity cost approach (outsider’s view point approach).Sandhill Inc. wants to purchase a new machine for $37,840, excluding $1,300 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,100, and Sandhill Inc. expects to sell it for that amount. The new machine will decrease operating costs by $8,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.Click here to view the factor table.(a)Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period enter the cash payback period in years rounded to 2 decimal places years (b)Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return enter the internal rate of return in…International Soup Company is considering replacing a canning machine. The old machine is being depreciated by the straight-line method over a 10-year recovery period from a depreciable cost basis of $120,000. The old machine has 5 years of remaining usable life, at which time its salvage value is expected to be zero, and it can be sold now for $40,000. This machine has a current book value of $60,000. The purchase price of the new machine is $250,000. Employees were sent to a training course last year on how to use the new machine; this training cost $5,000. The new machine has a 5-year life and an expected salvage value of $25,000. Annual savings of electricity, labor, and materials from use of the new machine are estimated at $40,000. The company is in a 40 percent tax bracket and its cost of capital is 16 percent. The MACRS depreciation method will be used and the recovery percentages for assets with a 5-year class life are given below What is the initial cash outlay for the new…
- Georgia Energy is contemplating replacing an oil-powered generator with a solar powered generator. The old generator was purchased twenty-two years ago and is being depreciated over its 25-year life to a zero salvage value using straight-line depreciation. The old generator has a book value of $4.5 million but could be sold today for $3.0 million. The solar powered generator would cost $10 million and be depreciated over a 4-year life using MACRS (.3333,.4445,.1481,.0741). Due to the rapidly changing technology, it is anticipated that the new generator will be sold after three years for $1.0 million. The new generator is expected to save Georgia Energy $10 million a year during its 3-year life. Georgia Energy will need to increase working capital by $1.5 million. The company’s WACC is 10% and the tax rate is 35%. What is the project’s net present value (NPV)? Should the oil-powered generator be replaced? View keyboard shortcutsBlossom Inc. wants to purchase a new machine for $25,900, excluding $1,200 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $1,700, and Blossom Inc. expects to sell it for that amount. The new machine will decrease operating costs by $6,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view PV table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, eg. 10.53.) Cash payback period years (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % (c) Assuming the company has a required rate of return of 10%, determine whether the new machine should be purchased. The…BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period (b) Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return (c) years The investment Assuming the company has a required rate of return of 10%, determine whether the new machine…
- Sheridan Inc. wants to purchase a new machine for $44,300, excluding $1,500 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,200, and Sheridan Inc. expects to sell it for that amount. The new machine will decrease operating costs by $10,000 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value. Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.) Cash payback period 4.36 years (b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % (c) Assuming the company has a required rate of return of 9%, determine whether the new machine should…St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $180,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $27,000 to $81,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00 %, 19.20 %, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. $Atlantic Control Company purchased a machine 2 years ago at a cost of $70,000. The machine is being depreciated using simplified straight-line over its 7-year class life. The machine would have no salvage value at the end of year 7, but could be sold now for $40,000.A new replacement machine can be purchased for $80,000. The new machine would be depreciated over 5 years. Rapidly changing technology has necessitated this project. Delivery and installation charges will amount to $10,000 and net working capital investment of $5,000 will be required at installation. The new machine will not increase sales, but will reduce operating costs by $20,000 per year. The firm's tax rate is 21%. What is the initial outlay for the project?