How did they get net cash inflow in this problem? I don't need anything else solved, just need to know how they got the net cash inflow because the text doesn't explain it. Expert Chips is a manufacturer of prototype chips based in Buffalo, New York.A(Click the icon to view the prototype chips information.)E (Click the icon to view information on the options.)Present Value of $1 tablePresent Value of Annuity of $1 tableFuture Value of $1 tableFuture Value of Annuity of $1 tableRead the requirements.Requirements 1 and 2. Calculate the after-tax cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021 - 2027 period and calculate the net present value for each alternative.Let's begin with the "modernize" alternative. Start by computing the present value of the after-tax cash flows from operations, then calculate the present value of the after-tax cash savings from depreciation and the terminal disposal value, andfinally, determine the total net present value (NPV) of the investment for the "modernize" alternative. (Round intermediary calculations and your final answers to the nearest whole dollar. Use a minus sign or parentheses for a negative presentvalue of net cash flows.)Net CashPresent ValuePV factorInflowof Cash FlowsNet initial investment$ (34,400,000)After-tax cash flows from operations:Dec 31, 20210.8932$4,760,0004,250,680%3DDec 31, 20220.7975,440,0004,335,680%3DDec 31, 20230.7126,120,0004,357,440%3DDec 31, 20240.6366,800,0004,324,800%3DDec 31, 20250.5677,480,0004,241,160Dec 31, 20260.5078,160,0004,137,120Dec 31, 20270.4528,840,0003,995,680%3D More infoData tableThe following data on the two options are available:Next year, in 2021, Expert Chips expects to deliver 595 prototype chips at anaverage price of $62,000. Expert Chips' marketing vice president forecasts growthof 85 prototype chips per year through 2027. That is, demand will be 595 in 2021,680 in 2022, 765 in 2023, and so on.ModernizeReplaceInitial investment in 2021$34,400,000 $64,500,000Terminal disposal value in 20276,400,000 $15,000,000The plant cannot produce more than 580 prototype chips annually. To meet futuredemand, Expert Chips must either modernize the plant or replace it. The oldequipment is fully depreciated and can be sold for $3,900,000 if the plant isreplaced. If the plant is modernized, the costs to modernize it are to be capitalizedand depreciatedretained as part of the "modernize" alternative.Useful life7 years7 yearsTotal annual cash operating cost per prototype chip46,000 $36,000the useful life of the modernized plant. The old equipmisExpert Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, weassume no change in prices or costs in future years. The investment will be made at the beginning of2021, and all transactions thereafter occur on the last day of the year. Expert Chips' required rate ofreturn is 12%. There is no difference between the "modernize" and "replace" alternatives in terms ofrequired working capital. Expert Chips pays a 50% tax rate on all income. Proceeds from sales ofequipment above book value are taxed at the same 50% rate.PrintDone

Data given: Sale of prototype chips in 2021 = 595 Sale of prototype chips in 2022 = 595+85= 680 Sale…

Answered: How did they get net cash inflow in…

How did they get net cash inflow in this problem? I don't need anything else solved, just need to know how they got the net cash inflow because the text doesn't explain it.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1hM

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