User Account

All Pages

replacement decision, Corporate Finance

Assignment Help:
#question.Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and management estimated, and still believes, that the salvage value will be zero at the end of its 15 yrs life. The machine is being depreciated at on a straight line basis, therefore ots annual depreciation charge is sh. 5 million, and its present book value is sh.25 million. The R&D manager reports that a new special purpose machine can be purchased for sh. 120 million(including freight and installation of sh. 10 million and 30 million respectively) which, over itd 5 year life will reduce labour and raw materials usage sufficient to cut operating costs from sh. 70 million to sh. 40 million. It is estimated that the new machine can be sold for sh. 20 million at the end of its life. The old machine actual current market value is sh. 10 million, which is below its sh. 25 million book value. If the new machine were acquired, the old lathe would be sold to another company. Networking capital requirements will increase by sh. 10 million at the time of replacement. The company is in 40% tax bracket and the cost of capital is 12%. The company will maintain the straight basis of depreciating similar machines. Determine the following:
Net cashflows at the time of replacement?
incremental cashflows over the life of the new lathe?
net terminal cashflows at the end of new machines life?
payback period for the replacement decision?
net present value of the new lathe?
the replacement decision internal rate of return?
should the decision to replace be undertaken?
.

Related Discussions:- replacement decision

? The effect of incorrect recognition of revenue on, A? The effect of incor...

A? The effect of incorrect recognition of revenue on financial reportssk question #Minimum 100 words accepted#

INVESTMENT DECISION, YOU ARE A CEO OF A SOFTWARE COMPANY WHICH HAS LIMITED ...

YOU ARE A CEO OF A SOFTWARE COMPANY WHICH HAS LIMITED ACCESS TO DEBT EQUITY MARKETS. YOUR FIRMS AVERAGE RETURN ON LAST YEAR PROJECTS IS 28% AND COST OF CAPITAL IS 12 %.Would Npv or

Report of a questionable, Please l have an assignment and l want to send th...

Please l have an assignment and l want to send the document to you so that you will send it to the Tutors on Chegg to help me with it. Can l send it please?

Can the goal of maximizing the value of the stock co, Ask qCan the goal of ...

Ask qCan the goal of maximizing the value of the stock conflict with other goals such as avoiding unethical or illegal behavior? In particular, do subjects like customer and employ

Use of forecasting method, Cooper Toys sells a portable baby stroller calle...

Cooper Toys sells a portable baby stroller called the Tot n' Trot. The past two years of demand for Tot n'Trots are shown in the table below. Use an appropriate method to forecast

Establishing the scale and cost of phoenix activity, Q. Establishing the sc...

Q. Establishing the scale and cost of phoenix activity? In 1996, the Australian Securities Commission (ASC, now ASIC) quantified the annual loss to Australian businesses due to

Replacement decision, Baobab rolling mills owns a lathe machine which was p...

Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and management

Bond valuation, An investor buys a French government, 10-year bond, paying ...

An investor buys a French government, 10-year bond, paying annual coupon of 4.5%. Face value = 1000. The investor is unsure of his investment horizon and considers 5 horizons: 5, 6

Types of fixed income securities, Question: i) Compare and contr...

Question: i) Compare and contrast the various types of fixed income securities. ii) ‘A new issue of callable bonds will generally carry a higher interest rate

Acquisition, pfa

pfa

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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