Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are
Posted: Fri Jul 01, 2022 7:46 am
Filkins Fabric Company is considering the replacement of itsold, fully depreciated knitting machine. Two new models areavailable: Machine 190-3, which has a cost of $190,000, a 3-yearexpected life, and after-tax cash flows (labor savings anddepreciation) of $87,000 per year; and Machine 360-6, which has acost of $360,000, a 6-year life, and after-tax cash flows of$98,300 per year. Knitting machine prices are not expected to rise,because inflation will be offset by cheaper components(microprocessors) used in the machines. Assume that Filkins's costof capital is 14%.
Calculate the two projects' extended NPVs. Do not roundintermediate calculations. Round your answers to the nearestdollar.
Machine 190-3: $
Machine 360-6: $
Should the firm replace its old knitting machine? If so, whichnew machine should it use?
By how much would the value of the company increase if itaccepted the better machine? Do not round intermediatecalculations. Round your answer to the nearest dollar.
$
What is the equivalent annual annuity for each machine? Do notround intermediate calculations. Round your answers to the nearestdollar.
Machine 190-3: $
Machine 360-6: $
Calculate the two projects' extended NPVs. Do not roundintermediate calculations. Round your answers to the nearestdollar.
Machine 190-3: $
Machine 360-6: $
Should the firm replace its old knitting machine? If so, whichnew machine should it use?
By how much would the value of the company increase if itaccepted the better machine? Do not round intermediatecalculations. Round your answer to the nearest dollar.
$
What is the equivalent annual annuity for each machine? Do notround intermediate calculations. Round your answers to the nearestdollar.
Machine 190-3: $
Machine 360-6: $