### Should the firm purchase the new machine

Assignment Help Financial Management
##### Reference no: EM131524343

Coiner Clothes is contemplating the replacement of one of its knitting machines with a newer, and more efficient one. The old machine has a book value of \$600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for \$265,000. The old machine is being depreciated by \$120,000 per year, using the straight- line method. The new machine has a purchase price of \$1,175,000, an estimated useful life MACRS class life of 5 years, and an estimated salvage value of \$145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The new machines is expected to save on electric power usage, labor and repair costs, as well as to reduce the number of defective articles of clothing. In total, an annual savings of \$255,000 will be realized if the new machine is installed. The company’s marginal tax rate is 35% and it has a wacc of 12%. Should the firm purchase the new machine? Clearly support your answer

#### Questions Cloud

 Security management scoring guide : For this assignment, presentation in which you explore the security tasks that systems administrators should be knowledgeable about. General binomial method for option pricing : The general binomial method for option pricing has, at its root, the valuation of a one-period option on a stock with only two possible future values. The processes of visual perception help you to engage : Describe ways in which the processes of visual perception help you to engage in everyday activities, such as driving a car or preparing a meal. Discuss security issues related to researched technologies : From the e-Activity, discuss two security issues related to the researched technologies. Analyze the security protection currently implemented on the device. Should the firm purchase the new machine : The company’s marginal tax rate is 35% and it has a wacc of 12%. Should the firm purchase the new machine? Solve the birthday problem : Use simulation to solve the Birthday Problem using the data file ObservedBirthDays.xls at www.cengagebrain.com. Explain a health and safety plan : Explain a health and safety plan (to prevent responder injury or illness) that includes at least three provisions to ensure personnel safety Opportunity in serving the rapidly growing segment : You want to start a business and perceive an opportunity in serving the rapidly growing segment of the US population over 50. Interested in issuing bonds with warrants : McGovern Enterprises is interested in issuing bonds with warrants attached. The bonds will have a 30-year maturity and annual interest payments.

### Write a Review

#### The higher the correlation coefficient between two stocks

In the statement, "The higher the correlation coefficient between two stocks, the greater will be the benefit from diversifying by combining the two stocks in a

#### What is the current ratio

Suppose Levi's Luxury Shop has cash of \$8,745, inventory of \$36,287, fixed assets of \$14,204, accounts payable of \$66,410, and accounts receivable of \$20,033. What is the current ratio?

#### What will be the price of each bond if their yields increase

Consider three bonds with 5.5% coupon rates, all making annual coupon payments and all selling at a face value of \$1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has matur..

#### What is the yield on two-year treasury securities

The real risk-free rate is 2.25%. Inflation is expected to be 1.5% this year and 4.25% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities?

#### Dividend initiation and stock value

Dividend Initiation and Stock Value A firm does not pay a dividend. It is expected to pay its first dividend of \$1.40 per share in 3 years. This dividend will grow at 14 percent indefinitely. Using a 16 percent discount rate, compute the value of thi..

#### Resource management structure and budget process

The Budget Analyst must have working knowledge of the budget process and Resource Management structure,

#### Securities in which fund invests increase in value

You purchased 1,000 shares of the New Fund at a price of \$20 per share at the beginning of the year. You paid a front-end load of 4.25%. The securities in which the fund invests increase in value by 16.75% during the year. The fund's expense ratio is..

#### What annual rate of return is she expecting

An individual has \$1,100,000 in a retirement account. at the beginning of each mint she plans to withdraw \$10,000 for the next 30 years depleting the account, what annual rate of return is she expecting? if she is only able to earn 8% a year on her m..

#### Purchase of the injection-molding machine be justified

Larson Manufacturing is considering purchasing a new injection-molding machine for S250,000 to expand its production capacity. It will cost an additional \$20,000 to do the site preparation. With the new injection-molding machine installed, Larson Man..

#### What is teh weighted average cost of capital

What is teh weighted average cost of capital assuming that this company capital structure is the following: Debt 58%, Commonstock 40% and preferred stock 2%.

#### Value of your stock holdings will do on ex-dividend date

What do you expect the value of your stock holdings will do on the ex-dividend date?

#### The aqua liquid assets money market mutual fund

The Aqua Liquid Assets Money Market Mutual Fund has a NAV of \$1 per share. During the year, the assets held by this fund appreciated by 1.1 percent. If you had invested \$15,000 in this fund at the start of the year, how many shares would you own at t..