Considering replacing its old milk-shake machine

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Reference no: EM131044973

Duck Lake Diner is considering replacing its old milk-shake machine with a newer one. The old milk-shake machine is currently worth $1000 and is being depreciated to zero. It was purchased 5 years ago for $2665 and was being depreciated on a straight line basis over its original 8 year life to zero. The new milk-shake machine would cost $2500. It is being depreciated on a straight line basis over three years to its expected salvage value of $1200. Both machines require the same upkeep. In three years, the Diner will be closed when traffic is rerouted onto a new highway. The old machine could be sold for $250 at the end of three years. The tax rate is 40%. If Duck Lake Diner's opportunity cost of capital is 15%. should Duck Lake Diner replace the milk shake machine? show the workings

Reference no: EM131044973

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Considering replacing its old milk-shake machine : Duck Lake Diner is considering replacing its old milk-shake machine with a newer one. The old milk-shake machine is currently worth $1000 and is being depreciated to zero. It was purchased 5 years ago for $2665 and was being depreciated on a straight..

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