Essay
Bull Gator Industries is considering a new assembly line costing $6,000,000.The assembly line will be fully depreciated by the simplified straight line method over its 5 year depreciable life.Operating costs of the new machine are expected to be $1,100,000 per year.The existing assembly line has 5 years remaining before it will be fully depreciated and has a book value of $3,000,000.If sold today the company would receive $2,400,000 for the existing machine.Annual operating costs on the existing machine are $2,100,000 per year.Bull Gator is in the 46 percent marginal tax bracket and has a required rate of return of 12 percent.
a.Calculate the net present value of replacing the existing machine.
b.Explain the impact on NPV of the following: 
Correct Answer:
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Depreciation on old machine
$3,000,000...View Answer
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Correct Answer:
Verified
Depreciation on old machine
$3,000,000...
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
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