Calculate the cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021- 2027 period.
Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2021, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips' marketing vice president forecasts growth of 65 prototype chips per yea through 2027. That is, demand will be 615 in 2021, 680 in 2022, 745 in 2023, and so on. @ (Click the icon to view additional information.) The following data on the two options are available: E (Click the icon to view the data on the two options available and additional information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements.
First, determine the cash inflows and outflows of the modernize alternative over the 2021 to 2027 period. (Use a minus sign or parentheses for a cash outflows. If an input field is not used in the table, leave that input field empty, do not ente zero.
Units sold
Net cash
Initial
Proceeds from
Data table
X
Year Jan 1, 2021 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31,2024
contributions
investments
sale of equipment
Modernize Replace Initial investment in 2021 $ 35,300,000 $ 66,300,000 Terminal disposal value in 2027 $ 7,500,000 $ 16,000,000 Useful life 7 years 7 years Total annual cash operating cost per prototype chip 78,500 $ 66,000
Dec 31,2025 Dec 31,2026 Dec 31,2027
assume no change in prices or costs in future years. The investment will be made at the beginning of 2021, and all transactions thereafter occur on the last day of the year. Dublin Chips* required rate of return is 14%. There is no difference between the modernize and replace alternatives in terms of required working capital. Dublin Chips has a special waiver on income taxes until 2027.
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