A firm is trying to determine whether to replace an

Reference no: EM13585803

A firm is trying to determine whether to replace an existing asset. The proposed asset has a purchase price of $50,000 and has installation costs of $3,000. The asset will be depreciated over its five year life using the straight-line method. The new asset is expected to increase sales by $17,000 and non-depreciation expenses by $2,000 annually over the life of the asset. Due to the increase in sales, the firm expects an increase in working capital during the asset's life of $1,500, and the firm expects to be able to sell the asset for $6,000 at the end of its life. The existing asset was originally purchased three years ago for $25,000, has a remaining life of five years, and is being depreciated using the straight-line method. The expected salvage value at the end of the asset's life is $5,000; however, the current sale price of the existing asset is $20,000, and its current book value is $15,625. The firm's marginal tax rate is 34 percent and its required rate of return is 12 percent.If the new machine is purchased, depreciation expense will increase or decrease by?

Reference no: EM13585803

Questions Cloud

Delta inc is considering the purchase of a new machine : delta inc. is considering the purchase of a new machine which is expected to increase sales by 10000 in addition to

Roland company sold 654400 boxes of pie mix under a new : roland company sold 654400 boxes of pie mix under a new sales promotional program. each box contains one coupon which

A 60kg diver jumps off a platform that is 10m above the : a 60kg diver jumps off a platform that is 10m above the surface of the water with an initial upward velocity of 3ms.

Jack and mike have 128 marbles altogether jack gives 14 of : jack and mike have 128 marbles altogether. jack gives 14 of his marbles to norman and mike gives 37 of his to norman.

A firm is trying to determine whether to replace an : a firm is trying to determine whether to replace an existing asset. the proposed asset has a purchase price of 50000

Your master was so much fun you have decided you wish to : 1 your master was so much fun you have decided you wish to get your doctorate. you have a scholarship for tuition but

Why does the use of activity based costing provide more : for companies that manufacture several products that use different proportions of manufacturing overhead resources why

Question a 20-ft-by-30-ft swimming pool is filled with : question a 20-ft-by-30-ft swimming pool is filled with water. the depth is measured at 5-ft intervals starting at one

Refrigerant 134a enters a compressor operating at steady : refrigerant 134a enters a compressor operating at steady state as saturated vapor at 0.12 mpa and exits at 1.2 mpa and

User Account

All Pages