# Calculate the net present value

Barton Company wants to replace a machine that has a zero book value and a market value of \$12,800 in January 2011. The new machine Barton is considering has a cost of \$50,000 and an estimated useful life of five years. The new machine will create cost savings of \$14,500 per year. The machine will require an additional investment in working capital of \$4,000, which would be recovered at the end of the machine’s life. The new machine would be depreciated uniformly over its useful life. Barton has a 25 percent tax rate and a 14 percent cost of capital.

Required:

A. Calculate the net present value of the new machine.

If Scott Construction Company purchases a new steamroller, it will sell its old steamroller. The cost of the old steamroller is \$215,000 and the accumulated depreciation on the old steamroller is \$150,700. Scott’s tax rate is 30 percent. What is the book value of the steamroller? If the steamroller sold for \$84,000 cash, what is the after-tax cash inflow from the sale of the steamroller?

If the steamroller sold for \$54,000 cash, what is the after-tax cash inflow from the sale of the steamroller?

30% OFF
Turnitin Report
Formatting
Title Page
Citation
Place an Order