Should the firm replace its old knitting machine

Assignment Help Finance Basics
Reference no: EM131101180

Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise, because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins' cost of capital is 14 percent. Should the firm replace its old knitting machine, and, if so, which new machine should it use?

Reference no: EM131101180

Questions Cloud

Why is it true, in general, that a failure to adjust : Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?
What is the basis for this emphasis on cash flows : Operating cash flows, rather than accounting profits, are listed in Table 11-4.What is the basis for this emphasis on cash flows as opposed to net income?
Define cash flow accounting income : Define each of the following terms: a. Cash flow; accounting income b. Incremental cash flow; sunk cost; opportunity cost c. Net operating working capital changes; salvage value d. Real rate of return, rr, versus nominal rate of return
What is its optimal economic life : Should the firm operate the truck until the end of its 5-year physical life, or, if not, what is its optimal economic life?Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a pro..
Should the firm replace its old knitting machine : Assume that Filkins' cost of capital is 14 percent. Should the firm replace its old knitting machine, and, if so, which new machine should it use?
Which machine should the company use : After 4 years, the machine must be replaced. Machine B costs $15 million and realizes after-tax inflows of $3.5 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will ..
How much would the value of the company increase : the company's cost of capital is 12 percent. By how much would the value of the company increase if it accepted the better project (plane)?
What are the two projects'' irrs at these same costs : a. What are the two projects' net present values, assuming the cost of capital is 5%? 10% ? 15% ? b. What are the two projects' IRRs at these same costs ofcapital?
Listen to the pod-cast in this link : THEN COMPOSE A SHORT PIECE EXPLAINING YOUR ANSWER TO EACH QUESTION BELOW, minimum one paragraph or ten (10) sentences.  No fragments.:

Reviews

Write a Review

Finance Basics Questions & Answers

  What amount of gain or loss does ron realize on the form

Ron and Hermione formed Wizard Corporation on January 2.  Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock.  Hermione contributed a building and land with the following fair market values and tax-adjusted bases in ..

  In this post you will be challenged to look at how

in this post you will be challenged to look at how statistical tests such as correlation are commonly used and the

  Compute the discounted payback statistic for project x

Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 13 percent and the maximum allowable discounted payback..

  Describe or define and discuss a type of bond that

describe or define and discuss a type of bond that interests you and how it is differentiated from other bonds. then

  Market-based economy to a market-based society

Has America shifted from a market-based economy to a market-based society? If so, is this inherently bad? What is the proper role of he markets in society?

  Estimating current price of shares

Napa Auto Parts last dividend was $1 and the corporation expects to experience no growth for next three years. However, Napa will grow at an annual rate of 10 percent between the 3rd and 4th year and between the fourth and 5th years.

  Formula for value of 1898 deposit for sale of munitions fact

The great grandparents of one of your classmates sold their munitions factory to government in beginning if 1898 during the Spanish-American War for 150,000.

  Convertible debt-project evaluation and bankruptcy

What are the benefits and costs of placing the financially troubled company Bankruptcy proceeding? Is this a legitimate and ethical vehicle for management to employ for the benefit of company's stakeholders?

  Young noted that you included an allowance

Your manager, Felix Young, wants to know why your estimate of the time it will take to get an MRP system up and running is so long.

  Component of indirect costs

1) Distrust, disrespect, and animosity pertain to which component of indirect costs associated with mismanaged organizational stress?

  Compute break-even point and margin of safety ratio

Poole Company has collected the following data after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000; direct materials $511,000; direct labor $285,000;

  Which is not a function of the foreign exchange market

Which of the following is not a function of the foreign exchange market?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd