Depreciated on straight line basis and has no salvage value

Assignment Help Financial Management

Reference no: EM13987870

One year ago your company purchased a machine for $110,000. You have learned that the new, much better machine is available for $150,000. In will be depreciated on a straight line basis and has no salvage value. You expect the machine to produce $60,000 per year in revenue and cost $20,000 per year to operate for the next ten years. The current machine is expected to produce $40,000 per year in revenue and also costs $20,000 per year to operate. The current machine’s depreciation expense is $10,000 per for the next 10 years, after which it will be discarded. It will have no salvage value. The market value of the current machine today is $50,000. Your company’s tax rate is 45% and the opportunity cost of capital is 10%. Should your company replace its year-old machine?

Reference no: EM13987870

Questions Cloud

Determine the final temperature of the system : Determine the final temperature of the system. Calculate the change in entropy of the system. Find the mass of the water that froze (if no water froze, then report 0).

Invest cash in temporary investments : Why might a business invest cash in temporary investments?

Requirements for reformulated gasoline : In the early 1990s, the California Air Resources Board (CARB) started planning its “Phase 2” requirements for reformulated gasoline (RFG). RFG is gasoline blended to tight specifications designed to reduce pollution from motor vehicles. CARB consulte..

Explain how to use an avl tree or a red-black tree : What does a splay tree look like if its entries are accessed in increasing order by their keys? Explain how to use an AVL tree or a red-black tree to sort ncomparable elements in O(nlog n) time in the worst case.

Depreciated on straight line basis and has no salvage value : One year ago your company purchased a machine for $110,000. You have learned that the new, much better machine is available for $150,000. In will be depreciated on a straight line basis and has no salvage value. The market value of the current machin..

What is the compound value of the payments : How long will it take to triple your money with an interest rate of 10 percent? On the advice of your broker ten years ago, you invested in a $6 stock that is now selling for $30. At what rate has your capital grown? What is the compound value of the..

Compounded monthly in your investment account : Your current age is 22 and you plan to retire at age 67. At retirement you want to have a “nest egg” of $3 million in today’s buying power. Over that time-period you expect inflation to average 3% per year. If you can earn 3.8% APR, compounded monthl..

What would you recommend as a backup solution : You need to make sure that you back up the databases each night in case you have a disaster and must recover them from backup. Because each database takes two hours to back up and you only have a six-hour window in which to do backups each day, wh..

Considering investing in a four-year bond : Suppose that you are considering investing in a four-year bond that has a par value of $1,000 and a coupon rate of 6%. What is the price of the bond if the market interest rate on similar bonds is 6%? What is the bond’s current yield? Suppose that yo..

User Account

All Pages