Current Attempt in Progress Cullumber Partners is evaluating the replacement of an older machine with either the new SuperPlus or MaxPlus machine. The market value of the original machine is $8,000 but it has an expected salvage value of $1,000 in 5 years. The details regarding the two new machines are as follows: Reduced Annual Pretax Machine Cost Useful Life Salvage Value Operating Cash Flows SuperPlus $25,000 5 years $2,000 $5,700 MaxPlus $38,000 5 years $3,000 $5,900 The company's tax rate is 40% and the machines are Class 10 assets with a 30% CCA rate. The company's required return is 11%. Estimate the NPV of replacement. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45). Round intermediate and final answers to O decimal places, e.g., 2,345.) NPV of SuperPLUS $ NPV of MaxPLUS $
Current Attempt in Progress Cullumber Partners is evaluating the replacement of an older machine with either the new SuperPlus or MaxPlus machine. The market value of the original machine is $8,000 but it has an expected salvage value of $1,000 in 5 years. The details regarding the two new machines are as follows: Reduced Annual Pretax Machine Cost Useful Life Salvage Value Operating Cash Flows SuperPlus $25,000 5 years $2,000 $5,700 MaxPlus $38,000 5 years $3,000 $5,900 The company's tax rate is 40% and the machines are Class 10 assets with a 30% CCA rate. The company's required return is 11%. Estimate the NPV of replacement. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45). Round intermediate and final answers to O decimal places, e.g., 2,345.) NPV of SuperPLUS $ NPV of MaxPLUS $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Current Attempt in Progress
Cullumber Partners is evaluating the replacement of an older machine with either the new SuperPlus or MaxPlus machine. The market
value of the original machine is $8,000 but it has an expected salvage value of $1,000 in 5 years. The details regarding the two new
machines are as follows:
Reduced Annual Pretax
Machine
Cost
Useful Life
Salvage Value
Operating Cash Flows
SuperPlus
$25,000
5 years
$2,000
$5,700
MaxPlus
$38,000
5 years
$3,000
$5,900
The company's tax rate is 40% and the machines are Class 10 assets with a 30% CCA rate. The company's required return is 11%.
Estimate the NPV of replacement. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses e.g. (45).
Round intermediate and final answers to O decimal places, e.g., 2,345.)
NPV of SuperPLUS
$
NPV of MaxPLUS
$
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