24 Jul WHAT ARE THE INCREMENTAL NET CASH FLOWS THAT WILL OCCUR AT THE END OF YEARS 1 THROUGH 5?
The Everly Equipment Companys flange-lipping machine was purchas Show more Problem 11-13 Replacement Analysis The Everly Equipment Companys flange-lipping machine was purchased 5 years ago for $80000. It had an expected life of 10 years when it was bought and is being depreciated by the straight-line method by $8000 per year. As the older flange-lippers are robust and useful machines it can be sold for $20000 at the end of its useful life. A new high-efficiency digital-controlled flange-lipper can be purchased for $150000 including installation costs. During its 5-year life it will reduce cash operating expenses by $45000 per year although it will not affect sales. At the end of its useful life the high-efficiency machine is estimated to be worthless. MACRS depreciation will be used and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33.33% 44.45% 14.81% and 7.41%. The old machine can be sold today for $50000. The firms tax rate is 35% and the appropriate WACC is 13%. If the new flange-lipper is purchased what is the amount of the initial cash flow at Year 0? Round your answer to the nearest whole dollar. $ What are the incremental net cash flows that will occur at the end of Years 1 through 5? Round your answers to the nearest whole dollar. CF1 $ CF2 $ CF3 $ CF4 $ CF5 $ What is the NPV of this project? Round your answer to the nearest whole dollar. $ Show less
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