Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Corporate Finance Expert

problem 1: Baobab rolling mills owns a lathe machine that was purchased 10 years ago at sh. 75 million. The machine had an expected life of 15 years at the time it was purchased, and management estimated and still believes that the salvage value will be 0 at the end of its 15 years life. The machine is being depreciated at on a straight line basis, thus opts annual depreciation charge is sh. 5 million, and its current book value is sh.25 million. The R&D manager reports that a new special purpose machine can be purchased for sh. 120 million(comprising freight and installation of sh. 10 million and 30 million correspondingly) which, over it 5 year life will reduce labor and raw materials usage enough 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 present market value is sh. 10 million that is below its sh. 25 million book value. If the new machine were acquired, the old lathe would be sold to the other company. Networking capital requirements will rise 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. Find out the following:

A) Net cash flows at the time of replacement?

B) Incremental cash flows over the life of new lathe?

C) Net terminal cash flows at the end of new machines life?

D) Payback period for the replacement decision?

E) Net current value of the new lathe?

F) The replacement decision internal rate of return?

G) Should the decision to substitute be undertaken?

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M91092

Have any Question? 


Related Questions in Corporate Finance

Assignmentcase study improving e-mail marketing

Assignment Case Study: Improving E-Mail Marketing Response Read the following case study. A company wishes to improve its e-mail marketing process, as measured by an increase in the response rate to e-mail advertisements ...

See how nonverbal communication affects a speakerworking in

See how nonverbal communication affects a speaker. Working in groups of three or four, have one person tell a three-minute story to the rest of the group. As he or she tells the story, demonstrate negative nonverbal comm ...

Evaluation of the agencys budgeting and cumulative reportas

Evaluation of the Agency's Budgeting and Cumulative Report As a consultant, you need to develop an in-depth analysis and evaluation of the selected agency's budgeting and then provide recommendations for improvement. The ...

1 what is the most popular form of financing or security

1. What is the most popular form of financing (or security type) required by venture capitalists in return for their investment? Why is this form of financing optimal for both the entrepreneur and the venture capitalist? ...

Write a memo rejecting an idea to shorten wait linesyoure

Write a memo rejecting an idea to shorten wait lines. You're new to the management staff of Cedar Point, a large amusement park in Sandusky, Ohio. Cedar Point is renowned for its 14 roller coasters and dozens of other ex ...

Ethical dilemma jason and mia are in their early 20s and

Ethical Dilemma. Jason and Mia are in their early 20s and have been married for three years. They are eager to purchase their first house, but they do not have sufficient money for a down payment. Mia's Uncle Chris has a ...

1 why do you think it is easier for firms with weak credit

1. Why do you think it is easier for firms with weak credit positions to obtain lease financing than bank loan financing? 2. Under what circumstances might a firm prefer intermediate-term borrowing to either long- or sho ...

Assignmentbackground information during the carter

Assignment BACKGROUND INFORMATION: During the Carter administration, long-term US Treasury yields exceeded 15%, and short-term T-Bills yielded near 20%. After Reagan's inauguration, interest rates began to fall as Fed Ch ...

1 financing what should be the first step in financing a

1. Financing. What should be the first step in financing a purchase of a car? Aside from the interest rate, what two factors will have the largest impact on the size of your monthly payment? 2. Leasing a Car. What are th ...

1 personal balance sheet what is a personal balance sheet2

1. Personal Balance Sheet. What is a personal balance sheet? 2. Asset Classifications. Name three classifications of assets. Briefly define and give examples of each. 3. Types of Investments. What are bonds? What are sto ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro