Pilot plus pens is deciding

Reference no: EM13841473

Pilot Plus Pens is deciding when to replace its old machine.The machine'scurrent salvage value is $2.2 million.Its current book value is $1.4 million.Ifnot sold, the old machine will require maintenance costs of $845,000 at theend of the year for next five years.Depreciation on the old machine is$280,000 per year.At the end of 5 years, it will have a salvage value of$120,000 and a book value of $0.A replacement machine costs $4.3 millionnow and requires maintenance costs of $330,000 at the end of year during itseconomic life of 5 years.At the end of five years, the new machine will have asalvage value of 800,000.It will be fully depreciated by the straight-linemethod.In five years a replacement machine will cost $3,200,000.Pilot willneed to purchase this machine regardless of what choice it makes today.Thecorporate tax is 40 percent and the appropriate discount rate is 8 percent.Thecompany is assumed to earn sufficient revenues to generate tax shields fromdepreciation.Should Pilot plus Pens replace the old machine now or at the end of 5 years?

Reference no: EM13841473

Questions Cloud

Define leadership and management. : Define leadership and management.

How do gambling fallacy and clustering illusion : How do gambling fallacy and clustering illusion relate to representativeness? Provide examples from sports. In what way are they different?

Benefit a multi-national corporation : Reflect on chapters 10 and 32 of your text book and the mentioned articles and watch the youtube video and search for other articles on the interent, write a paper to identify factors that would benefit a Multi-national Corporation (MNC) in an em..

Rates of return on stocks with more variable rates : In 250 words, explain why investors demand higher expected rates of return on stocks with more variable rates of return apa format with references

Pilot plus pens is deciding : Pilot Plus Pens is deciding when to replace its old machine.The machine'scurrent salvage value is $2.2 million.Its current book value is $1.4 million.Ifnot sold, the old machine will require maintenance costs of $845,000 at theend of the year for nex..

Explain the difference between accreditation and licensure : Explain the difference between accreditation and licensure

World of paralympic sport is classification : A major issued faced in the world of Paralympic Sport is classification. Should there be an "open class" or "different classes" of competition as discussed in our text? Should eligibility be determined by ability rather than disability? Sho..

The lewis blackman hospital safety act : Read Case: The Lewis Blackman Hospital Safety Act: It's hard to kill a healthy 15- year- old. Respond to questions 1and 2 and one additionalquestion found at the end of the case

Paper on costs associated with process failures and errors : Write term paper on Costs associated with process failures, errors, and poor outcomes. Students will be required to submit an 800 word minimum term paper of written material not including references

User Account

All Pages