Should your company replace its year-old machine

Assignment Help Accounting Basics
Reference no: EM133014512

Question - One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $165,000 today. It will be depreciated on a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $45,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $25,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $9,545 per year. The market value today of the current machine is $45,000. Your company's tax rate is 45%, and the opportunity cost of capital for this type of equipment is 12%. Should your company replace its year-old machine?

Reference no: EM133014512

Questions Cloud

What is musli weighted average cost of capital : Musli has debt outstanding with a market value of RM2.2 billion. What is Musli's weighted average cost of capital
Calculate the trend index for these years respectively : If you know that the amount of assets for the base year 2018 was 7826, the year 2019 was 8693, Calculate the trend index for these years respectively
What are the relevant costs for Ruby : Gem Inc. has contacted Ruby with an offer to sell 5,000 of the subassemblies for P1,350 each. What are the relevant costs for Ruby
Stages of the software engineering process : Develop components of the Software Specification and Design Documents discussed in lectures. Student groups should be formed by Session five
Should your company replace its year-old machine : The opportunity cost of capital for this type of equipment is 12%. Should your company replace its year-old machine
Prepare an income statement for the month of October : Teal Mountain Inc., a provider of consulting services, was founded on October 1, 2022. Prepare an income statement for the month of October
Describe and compare the main types of spyware : Describe and compare the main types of spyware - Discuss DDoS and explain its method of operations and Identify and explain the main difference between virus
What is the one year real rate of interest : Treasury bills are yielding 6.87%. Based on the domestic Fisher effect (actual, not approximation), what is the one year real rate of interest
What are the equivalent units of production for conversion : As of September 1, the beginning WIP Inventory was 45% completed as to labor and overhead. What are the equivalent units of production for conversion

Reviews

Write a Review

Accounting Basics Questions & Answers

  What evidence could you gather to verify the explanation

If so, come up with a plausible explanation for the difference. What evidence could you gather to verify the explanation.

  Which audit risks are associated with the installation

Shane Whitebone is getting to know his new client, Clarrie Potters, a large discount electrical retailer. Ben Brothers has been the engagement partner.

  Compute anticipated and current break-even sales

Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.

  How are cash purchases recorded

Which features in QuickBooks are used to record receipts and payments? 'Enter Bills' features and 'Pay Bills' features are used to record receipts and payments.

  Calculate the purchase price of the bond on february

A bond that has a face value of $5,000. Calculate the purchase price of the bond on February 10, 2015 when the yield was 3.90% compounded semi-annually.

  Prepare the necessary entries

Mr. Brightside Company purchased machinery costing $146,000. Prepare the necessary entries for 2019 and 2020 assuming Mr. Brightside has a December 31 year-end

  Explain why preferred stock is referred to as preferred

Write a 250- to 350-word paper explaining why preferred stock is referred to as preferred and what some of the features added to preferred stock are that make.

  Calculate the adjusted basis of his new residence

On December 15, 2012, Ted purchases and occupies a new residence at a cost of $175,000. Calculate the adjusted basis of his new residence

  Compute the ending inventory by the retail inventory method

The records of Bonita's Boutique report the following data for the month of April. Compute the ending inventory by the conventional retail inventory method

  Determining the income tax payable

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years. The income tax rate is 30% for all ..

  Compute the liability and equity component

PT ABC issued 1,000 shares of convertible bonds at par with a face value of Rp 200.000 per bond at January 1, 2019. Compute the liability and equity component

  Calculate Ulysses income tax liability

Neither have any dependents. Calculate Ulysses' income tax liability assuming the couple does not live in a community property state

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!

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