Problem 12.19 – Darlington Equipment Company

Fundamentals of Financial Management, Concise

Brigham and Houston

11th Edition

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Difficulty – Hard

Determine the amount of the initial cash flow at Year 0 after 100% bonus depreciation (NOT MACRS) is considered if the new machine is purchased, the incremental cash flows that will occur at the end of Years 1 through 5, the NPV of the project, and determine if Darlington should replace the old machine.

NOTE: The 11th edition of the textbook introduced 100% bonus depreciation. This is different from earlier editions of the book, which used MACRS depreciation.

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