Should the defender be replaced by this challenger now

Assignment Help Financial Management

Reference no: EM131536049

Four years ago a piece of equipment was purchased for $23,000. It has a CCA rate of 30%. Its current market value is $2000. Future market values will decline by 20% each year. The annual operating costs are estimated to be $4000 for next year of use and will increase by 6% per year if used for a longer duration. The company's tax rate is 40% and its MARR is 10%. Based on these data, the remaining economic life of this asset is found to be 2 years. A new machine costing $50,000 with a 12-year economic life and a $3000 salvage value may be purchased to replace the defender. The operating costs of this new machine are $3000 per year. This machine will also generate cost savings of $6000 per year due to higher efficiency and lower product defect rate. This machine's CCA rate is also 30%. The present equivalent cost of buying and using this challenger for 12 years has been found to be $22,817. Should the defender be replaced by this challenger now?

Reference no: EM131536049

Questions Cloud

Presence in two global markets : Choose a doughnut/cinnamon bun/bread company with presence in two global markets. Access the two countries' specific Web sites for the product you wish.

Estimate weighted average cost of capital for listed firm : Explain in details how you can estimate weighted average cost of capital for a listed firm in addition

Discussion of the efficient market hypothesis : Provide detailed explanation / discussion of the Efficient Market Hypothesis (EMH) and its implications in corporate finance.

Determining the information governance : Using the Internet or databases, research health care organizations / providers that have recently had a significant information technology failure.

Should the defender be replaced by this challenger now : Future market values will decline by 20% each year. Should the defender be replaced by this challenger now?

Analyze the company using statements : Each team is to select a different industry, and each team member is to select a different company in that industry and acquire its financial statements.

What is plastic surgery : What is plastic surgery

Reverse logistics question : What is the consumer goods and material recall process? In at least 600 words. This is more of a reverse logistics question.

The empirical validity of the capital asset pricing model : Explain, and in details, how you can test the empirical validity of the Capital asset Pricing Model.

User Account

All Pages