Adequate information: Cost of new machine = $15,600,000 Book value of current machine = $5,400,000 Market value of current machine = $4,100,000 Useful life of new machine = 4 years Savings = $6,300,000 Net working capital of New machine = $250,000 Tax rate = 21% or 0.21 Required return, r = 10% or 0.10 To compute: The NPV and IRR of the decision to replace the old machine. Introduction: Net present value : Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow . Internal rate of return : Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

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Answer 1

Question

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

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Answer 2

Question

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

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Answer 3

Question

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

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Answer 4

Question

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

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Answer 5

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 6

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 7

Chapter 6, Problem 25QAP

Summary Introduction

Adequate information:

Cost of new machine = $15,600,000

Book value of current machine = $5,400,000

Market value of current machine = $4,100,000

Useful life of new machine = 4 years

Savings = $6,300,000

Net working capital of New machine = $250,000

Tax rate = 21% or 0.21

Required return, r = 10% or 0.10

To compute: The NPV and IRR of the decision to replace the old machine.

Introduction:

Net present value: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Internal rate of return: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 8

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Answer 11

Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQ Ch. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQ Ch. 6 - Prob. 6CQ Ch. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQ Ch. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...

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