Replace an obsolete machine press

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Reference no: EM13900309

Our company must replace an obsolete machine press. We have two bids that are summarized below. Both of the presses fall into the MACRS 5 year property classification. Our company uses an after tax MARR of 12% and MACRS depreciation. Our company falls into the 38% total income tax bracket. The machines are sold at the end of 5 years for their salvage value. Select the most economical alternative based on the after-tax cash flow.

Data	A	B
Useful Life , Years	5	5
Initial Cost	$60,000	$76,000
Annual Operating Cost	75,000	70,000
Salvage Value	3500	5,000

Part 2

Our company has the option of selling Machine A for$10,000 at the end of year 4. Does this change your choice? Make sure to support your answer and show your work.

Reference no: EM13900309

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