Solution-What are the net cash flows for each year

What are the net cash flows for each year

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Reference no: EM132553533

The Dynamite Company is considering buying a new cutting machine. The existing cutting machine cost Php 500,000 five years ago and is being depreciated using a straight-line over a ten-year life. The company's management estimates that the old machine can be sold for Php 100,000. The new machine costs Php 600,000 and would be depreciated over five years using straight-line. There is no salvage value for the new machine. The new machine is more efficient and would reduce the cutting expenses by Php 120,000 per year for the next five years. The marginal tax rate is 30%.

Question a) What are the cash flows related to the acquisition of the new machine?

Question b) What are the cash flows related to the disposition of the old machine?

Question c) What are the operating cash flows for each year?

Question d) What are the net cash flows for each year?

In relation to the above problem, determine the NPV, IRR, Discounted Payback, Profitability Index, and Modified Internal Rate of Return (MIRR) if the required rate of return is 10%. Should you invest in this asset? Why?

Reference no: EM132553533

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What are the net cash flows for each year

Reference no: EM132553533

Reference no: EM132553533

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