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Existing pr… Show more Could somone help me with the below

Existing pr… Show more Could somone help me with the below; A printing company wishes to replace its old press. Existing press Originally purchased three years ago at an installed cost of $400,000, it is being depreciated using straight line method over a 10 year effective life. The old press has remaining economic life of 5 years. It can be sold today to net $460,000 before taxes. If the old press is retained it can be sold to net $150,000 before taxes at the end of 5 years. Press A Highly sophisticated press can be purchased for $830,000 plus $40,000 installation. It will be depreciated using the straight line method over a 5 year effective life. At the end of the 5 years, the machine could be sold to net $400,000 before taxes. If this machine is purchased then it is anticipated that hte following current account changes would occur; Cash + %25,000, Accounts Receivable + $120,000, Inventories – $20,000, Accounts payable + $35,000. Press B This is a less sophisticated option. It costs $640,000 + $20,000 installation. It will be depreciated using the straight line method over a 5 year effective life. At the end of the 5 years, the machine could be sold to net $330,000 before taxes. Acquisition of this press will have no impact on working capital investment. The firm estimates that its earnings before depreciation and taxes for all presses for each the 5 years are shown below. The firm is subject to 40% tax rate on ordinary income and capital gains. The cost of capital is 14%. Profits before depreciation and taxes for each press; Existing press Press A Press B Yr1 $120,000 $250,000 $210,000 Yr2 $120,000 $270,000 $210,000 Yr3 $120,000 $300,000 $210,000 Yr4 $120,000 $330,000 $210,000 Yr5 $120,000 $370,000 $210,000 Questions; 1 For each of the 2 proposed replacement presses, determine the initial investment, the operating net cash inflows and the terminal cash flow (at the end of year 5). 2. Determine the payback period (ignoring terminal cash flows), the NPV and the IRR for the investment decisions. 3. Recommend which, if either, of the presses the firm should acquire if it has, first, unlimited funds, and then under conditions of capital rationing. 4. Discuss conflicting rankings of the two presses if any resulting from the use of the NPV and IRR decision techniques. 5. What is the impact on your reccomendation of the fact that the operating net cash inflows for Press A are characterised as very risky in contract to the low risk operating cash inflows of Press B. I hope you can help. I have spent a month on this assignment and have a 17 page report ready to go but I am not sure if my maths is correct. • Show less

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