a4 Question 17Teagyn corp. produces PITAs and has a choice of upgrading or replacing a piece ofequipment. The upgrade would cost $25M and have an operating cost per unit of$62,000. Replacing the equipment would cost $39M and would reduce operatingcosts per unit from the upgrade estimate by 10%. Replacing would also allow thecurrent machine to be sold for $3M now. Regardless of the choice, Teagyn forecastssales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per yearover the next four years (five years in total, selling price and costs would remain thesame). Use a WACC of 12% and to compare these choices.What would the salvage (resale) value of the old machine be to change the decisionon an NPV basis? Please consider the changes in steps of $100,000 (i.e. $1,100,000to $1,200,000). Please enter your response with no units or commas and 1 decimalplace in millions: "$2,110,000" would be "2.1" (note: NO units and use 5/4 rounding).Your Answer:Answer

Part 2: Explanation:Step 1: Calculate the cash flows for the upgrade option.- Initial investment:…

Answered: Question 17 Teagyn corp. produces PITAs…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 13E

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