Solution-Does this change have an impact on their decision

Does this change have an impact on their decision

Assignment Help Financial Management

Reference no: EM1331517

Carlson Machine Shop is considering a four-year project to improve its production efficiency by purchasing a new machine press for $430,000. The machine press will result in $160,000 in annual pre-tax labor cost savings. The press will be depreciated using the 5 year MACRS depreciation schedule and they expect to be able to sell it for $70,000 at the end of four years.

The new press will require an initial inventory of $20,000 in spare parts for maintenance which will decrease by $4,000 a year over the four years. The $4,000 in unused spare parts inventory will be worthless at the end of the project but will still have a Net Book Value of $4,000.

Carlson has a 14% cost of capital and a 35% tax rate.

1. Use the Five Year Projection Worksheet to calculate the incremental Free Cash Flow and NPV. Should they buy the machine?

2. Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four. Does this change have an impact on their decision?

Reference no: EM1331517

Questions Cloud

Human resources methods for proficie : Staffing Strategies and Human Resources Methods for Proficie - What are your preliminary recommendations with regard to centralizing the staffing function under the Human Resources umbrella

Explain restricted information on the internet : Should information on the Internet be unrestricted? Why or why not? Provide examples.

Make binary search tree that will accept integers in order : modify a C++ Binary Search Tree that will accept integers in this order: 35, 18, 48, 72, 60, 25. Ask user for input and search tree utilizing integer input. Return "True" if input integer is found or "False" if it is not found in tree.

Identify two possible characteristics of nursing : Briefly identify two possible characteristics of nursing that might have contributed to this job burnout.

Does this change have an impact on their decision : Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four. Does this change have an impact on their decision?

Cultural differences derail an alliance team : How can cultural differences derail an alliance team?

Program that will search a file of numbers of type int : Write down a C++ program that will search a file of numbers of type int and write the largest and the smallest numbers to the screen. The file contains nothing but numbers of type int separated by blanks or line breaks.

Explain risk and benefits of creating online store : What risks and benefits do you think a business should consider before creating an online store

Considering various demographic segments : Considering various demographic segments such as older shoppers, teenagers, single mothers, and single, working professionals. What type of store environment might each of these shoppers prefer? What attributes might each segment rate as the most imp..

User Account

All Pages

Does this change have an impact on their decision

Reference no: EM1331517

Reference no: EM1331517

Questions Cloud

Reviews

Write a Review

Financial Management Questions & Answers

Determine the short run profit-maximizing price

Illustrate three long term external sources of finance

General business issues

Financial strategies, capital budgeting analysis

Foreign investment in india

Determine the proposed alternatives regarding insulin

Finance for exploratory resources

Develop a financial analysis

Problem on financial management

Compute the npv for project

Calculate the amounts for the current year

Prepare a business plan

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT