Practice_Prelim_2_So - 1c 2a 3a 4a 5c 6b 7e 8e 9c 10 c Chapter 10 Question 15 Input area Initial investment Pretax salvage value Cost savings per

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 c 2 a 3 a 4 a 5 c 6 b 7 e 8 e 9 c 10 c
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 10 Question 15 Input area: Initial investment $1,200,000 Pretax salvage value $125,000 Cost savings per year $450,000 Cost savings per year $400,000 Working capital reduction $- Annual depreciation charge $240,000 Aftertax salvage value $81,250 Tax rate 35% Required return 18% *Depreciation straight-line over life 5 Output area: $450,000 cost savings $400,000 Year Cash flow Year 0 $(1,200,000) 0 1 376,500 1 2 376,500 2 3 376,500 3 4 376,500 4 5 457,750 5 NPV $12,895.01 Accept/Reject Accept Required pretax cost savings: NPV w/o OCF ($1,164,484.88) Required OCF $372,376.46 OCF less dep. tax shield $288,376.46 Cost savings $443,656.09
Background image of page 2
cost savings Cash flow $(1,200,000) 344,000 344,000 344,000 344,000 425,250 $(88,738.04) Reject
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Problem 2 Input Area: Old cost $1,500,000 New machine cost $3,000,000 Life of machine 5 Salvage value $600,000 Old machine depreciation $500,000 MV old machine $1,200,000 Old machine value in 2 yrs $400,000 Saved operating costs
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 02/20/2009 for the course H ADM 225 taught by Professor Jwellman during the Fall '07 term at Cornell University (Engineering School).

Page1 / 11

Practice_Prelim_2_So - 1c 2a 3a 4a 5c 6b 7e 8e 9c 10 c Chapter 10 Question 15 Input area Initial investment Pretax salvage value Cost savings per

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online