Reference no: EM133436299
Sweet Acacia Inc. wants to replace its current equipment with new high-tech equipment. The existing equipment was purchased 5 5 years ago at a cost of $127,000. At that time, the equipment had an expected life of 10 years, with no expected saivage value. The ' equipment is being depreciated on a straight-line basis. Currently, the market value of the old equipment is $40,500.
The new equipment can be bought for $171,740, including installation. 0 $190,300 to $145,700 for the?rst six years, and from $205,400 to $191, ? will alsolfgcrease by $20,400 at the time of replacement. ver its 10-year life, it will reduce operating expenses from 600 for the last four years. Net working capital requirements can sell the new equipment for $24,800 at the end of its life. Since the new equipment's cash ?ows.
It is estimated that the company erage-risk project. The ?rm's maximum are relatively certain, the project's cost of capital is set at 10%, compared with 15% for an av acceptable payback period is 5 years.