User Account

All Pages

Evaluate replacement decisions

Assignment Help Finance Basics
Reference no: EM132494877

The Tomak Company purchased a machine three years ago for $160,000.

It is being depreciated on a straight-line basis over an eight-year life to a zero salvage value. This particular machine was purchased because the firm anticipated a high level of production that never materialized. The firm is considering selling this machine and purchasing a smaller model. It could sell this machine today for its book value of $100,000.

The smaller model costs $50,000, including installation costs, and would be depreciated on a straight-line basis over a five-year life to a zero salvage value. The smaller model will require more labor to operate and management estimates that labor costs will increase by $15,000 per year.

The firm's income tax rate is 46 percent. Finally, this firm uses a hurdle rate (WACC) of 14 percent to evaluate replacement decisions like this one. Should the firm acquire the smaller machine. Show all work.

Reference no: EM132494877

Questions Cloud

Paying out the dividend is as follows : Current earnings are R3.60 per share and the share sells for R40. Their abbreviated balance sheet before paying out the dividend is as follows:
What presto will record the acquisition cost of equipment : What Presto will record the acquisition cost of the equipment as? Presto Company purchased equipment and these costs were incurred
What the depreciation expense for the first year is : What The depreciation expense for the first year (2019) using the straight-line method of depreciation is and The total depreciable cost of the equipment is
Is outsourcing often an option for organizations : In discussing business profitability. Is Outsourcing often an option for organizations to reduce costs? provide specific examples, references
Evaluate replacement decisions : It is being depreciated on a straight-line basis over an eight-year life to a zero salvage value. This particular machine was purchased because the firm
What amount is received by alpha company for the amount : Beta Company returns £1,000 of merchandise that was damaged. What amount is received by Alpha Company for the amount due on August 22?
What cost of goods sold under the average-cost method : Assume a periodic inventory system is used. Cost of good sold under the average-cost method is? A company has the following data related to an item of inventory
What is the most you would be willing : If your required return on this stock is 8.59 percent, what is the most you would be willing to pay for Alfa Growth, Inc. common stock now?
What is the amount of interest revenue recorded : Alpha Company lends, Alpha Company prepares financial statements on December 31. What is the amount of interest revenue recorded in 2020?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd