Should the old machine be replaced

Assignment Help Finance Basics

Reference no: EM131970482

Question: Emotion Cosmetics is considering whether to replace one of its manufacturing machines with a new one that will increase operating income (excluding depreciation) by $14,300 per year for the next three years. The new machine costs $37,500, and it falls in the MACRS 3-year class. If the new machine is purchased, the old machine, which has a current book value equal to $8,300, will be sold for $5,000. If the old machine is kept, it will continue to be depreciated on a straight-line basis at $2,300 per year, and then it will be sold in three years for $2,000. If the new machine is purchased, Emotion plans to sell it in three years for $6,000. The firm's marginal tax rate is 40 percent, and its required rate of return is 11 percent. Should the old machine be replaced?

Reference no: EM131970482

Questions Cloud

How much must you deposit in equal annual deposits : At the end of 6 years you will receive $9,000 and deposit this in the bank toward your goal of $33,000 at the end of 11 years.

What legal minefields potentially face limited partnerships : What are the relative advantages of partnership versus limited partnership? What legal minefields potentially face limited partnerships?

How does the easing of monetary targets affect these policy : In light of recent economic downturns, monetary targets are more in the main stream. In addition, the bank's lending policy has tightened up greatly.

What is the probability of student x coming to gmu : If the probability of student X being sick, given that they've come to GMU, is 1%, then what is the probability of student X coming to GMU, given that they are

Should the old machine be replaced : Emotion Cosmetics is considering whether to replace one of its manufacturing machines with a new one that will increase operating income.

Does the project meet the companys cash payback criteria : Compute the cash payback period and net present value of the proposed investment. Does the project meet the company's cash payback criteria?

Difference between the two population proportions : Construct a 90% confidence interval for the difference between the two population proportions p1-p2. Use x1=108 n1=730, x2=73, and n2= 643

Calculate the amount of federal income tax : Repair Habitat Inc., a § 501(c)(3) organization. Calculate the amount of Federal income tax, if any, for Repair Habitat and for Concrete Pour.

How much does the investment bank generate in fees : How much does the investment bank generate in fees for creating the MBS, expressed as a dollar amount? How much is this when expressed as a percentage.

User Account

All Pages