At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with

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At times firms will need to decide if they want to continue to
use their current equipment or replace the equipment with newer
equipment. The company will need to do replacement
analysis to determine which option is the best financial
decision for the company.
Price Co. is considering replacing an existing piece of
equipment. The project involves the following:
Complete the following table and compute the incremental cash
flows associated with the replacement of the old equipment with the
new equipment.

At Times Firms Will Need To Decide If They Want To Continue To Use Their Current Equipment Or Replace The Equipment With 1 (29.79 KiB) Viewed 33 times

The net present value (NPV) of this replacement project is:
$1,876,139
$2,157,560
$2,251,367
$1,594,718
Year o Year 1 Year 2 Year 3 Year 4 Year 5 Ye Initial investment EBIT - Taxes -Δ Depreciation XT + Salvage value - Tax on salvage - NOWC Recapture of NOWC Total free cash flow