Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $43,870.00 seven years ago. The old equipment currently has no market value. The new equipment cost $55,296.00. The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $36,672.00. The new equipment is expected to save the firm $13,958.00 annually by increasing efficiency and cost savings. The corporation has tax rate of 30.61% and a required return on capital of 8.28%. Please enter your answers with two decimal places, as these are dollar amounts. A. What is the total initial cash outflow? (Show as a negative number): $ -55,296.00 B. What are the estimated annual operating cash flows? $ 11,110.66 C. What is the terminal cash flow? $ 36,672.00 D. What is the NPV for this project? $ 7,953.00

Your corporation is considering replacing older equipment. The old machine is fully depreciated and cost $43,870.00 seven years ago. The old equipment currently has no market value. The new equipment cost $55,296.00. The new equipment will be depreciated to zero using straight-line depreciation for the four-year life of the project. At the end of the project the equipment is expected to have a salvage value of $36,672.00. The new equipment is expected to save the firm $13,958.00 annually by increasing efficiency and cost savings. The corporation has tax rate of 30.61% and a required return on capital of 8.28%. Please enter your answers with two decimal places, as these are dollar amounts. A. What is the total initial cash outflow? (Show as a negative number): $ -55,296.00 B. What are the estimated annual operating cash flows? $ 11,110.66 C. What is the terminal cash flow? $ 36,672.00 D. What is the NPV for this project? $ 7,953.00

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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