St. John's Shipyard is considering the replacement of an 8-year old machine that has been fully depreciated and has nosalvage value with a new one that will increase its earnings before depreciation (EBITDA) by $27,000 per year. This newmachine will cost $115,000 and will have an estimated useful life of 8 years with no salvage value. The new machine will bedepreciated using 5-year MACRS which means rates of 20%, 32%, 19%, 12%6, 11%, and 6% during the first six years (andnothing thereafter). The applicable corporate tax rate is 35% and the WACC is 89%. Which of the following statements is thecorrect recommendation?The equipment should not be replaced since the net present value would be less than zeroThe equipment should be replaced because the net present value is $16,739.51The equipment should be replaced because the net present value is $18,505.91D The equipment should be replaced because the net present value is $27,238.30The equipment should be replaced because the net present value is $32,473.74B Colima Communications finance department has collected the following information concerning a proposed project: Salesrevenues should be $1,700,000, operating costs excluding depreciation should be $1,190,000, depreciation expense should be$204,000, and interest expense should be $85,000. The company's tax rate is 20% and its WACC is 9%. What is the project'sfirst year cash flow (CF1)?A $397,800B) $408,000$438,600D) $448,800E $499,210

As per honor code, we can provide solution to only first question, so here we go: NPV calculates…

Answered: St. John's Shipyard is considering the…

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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