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getsetgo, MBA
Category: Homework
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Experience:  MBA from IIM Calcutta, Engineer, 8+ years of exp. at executive level
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Integrative-Investment decision. Holliday manufacturing qu

Resolved Question:

Integrative-Investment decision. Holliday manufacturing questions

a. Develop the relevant cash flows needed to analyze the proposed replacement

b. Determine the net present value (NPV) of the proposal

c. Determine the internal rate of return (IRR) of the proposal

d. make a recommendation to accept or reject the replacement proposal, and justify your answer

e. What is the highest cost of capital that the firm could have and still accept the proposal? Explain.


I will need the answers before 11:00 AM on 3/3/12. Thanks for your help.

Submitted: 4 years ago.
Category: Homework
Expert:  Steve replied 4 years ago.

what are the details of this?



Customer: replied 4 years ago.
Holliday manufacturing is considering the replacement of an existing machine. The new machine costs $1.2MM and requires installation costs of $150,000. The existing machine can be sold currently for $185,000 before taxes. it is 2 years old, cost $800,000 new, and has a $384,000 MACRS using a 5 year recovery period and therefore has the final 4 years of depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5-year will be $0. Over its 5-year life, the machine should reduce operating costs by $350,000 per year. The new machine will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for $200,000 net of removal and cleanup costs at the end of 5 years. An increased investment in net working capital of $25,000 will be needed to support operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9% cost of capital and is subject to 40% tax rate.
Expert:  getsetgo replied 4 years ago.
I will like to answer this one. I am working on it.
Expert:  getsetgo replied 4 years ago.

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getsetgo, MBA
Category: Homework
Satisfied Customers: 3486
Experience: MBA from IIM Calcutta, Engineer, 8+ years of exp. at executive level
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