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A large printing company is considering purchasing a new printing press to replace the existing one ...

Melly767

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A large printing company is considering purchasing a new printing press to replace the existing one ...

A large printing company is considering purchasing a new printing press to replace the existing one that cost the company $1 million five years ago. The new machine will cost the company $1.8 million, has an economic life of ten years, and an expected salvage value of $150,000. The old machine can be sold for $200,000 today or could be sold for $10,000 in ten years. Both machines have a CCA rate of 30% and the asset class will remain open and the half-year rule applies in the first year. The company projects that operating profit will increase by $400,000 per year. The company's tax rate is 40% and the cost of capital is 12%. What is the NPV of the replacement decision?

▸ $223,204

▸ $274,066

▸ $224,124

▸ $277,285

Textbook

Corporate Finance

Edition: 5^th

Author: Booth

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benschmann

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Melly767 Author

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I appreciate what you did here, answered it right Smiling Face with Open Mouth

kc123

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Helped a lot

shangshang

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Correct

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