Bull Gator Industries Is Considering a New Assembly Line Costing

question 10

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:
i. Required rate of return increases
ii. Operating costs of new machine are increased
iii. Existing machine sold for less

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Definitions:

Intersectional Approach

An intersectional approach examines how various social and political identities (like race, gender, class) overlap and impact issues of privilege, oppression, and experiences.

Social Identities

Aspects of an individual's identity derived from their perceived membership in social groups, such as gender, race, and social class.

Racial Identity

A person's identification with a particular racial group, influenced by social, cultural, and historical factors.

Racial Hierarchy

A system of classification that positions different races or ethnic groups in a ranked order, often with the erroneous justification of innate superiority or inferiority among them.