The woodruff corporation purchased a piece of equipment

Assignment Help Business Management

Reference no: EM13743951

The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation range (ADR) midpoint of 8 years. The old equipment can be sold for $90,000.
A new piece of equipment can be purchased for $320,000. It also has an ADR of 8 years. Assume the old and new equipment would provide the following operating gains (or losses) over the next 6 years.

YEAR New Equipment Old Equipment
1..................... $80,000 $25,000
2.................... 76,000 16,000
3.................... 70,000 9,000
4.................... 60,000 8,000
5....................... 50,000 6,000
6...................... 45,000 (7,000)

The firm has a 36 percent tax rate and a 9 percent cost of capital. Should the new equipment be purchased to replace the old equipment?

Reference no: EM13743951

Questions Cloud

Question regarding the ethos abodes inc : To make everyday homes feel like the homes of tomorrow by creating cheap and easy to use systems that integrate the functions of the modern home allowing owners to have ultimate control.

The annual additional energy requirement : The annual additional energy requirement is 350,000,000 kilowatt-hours. The cost of energy from Canada is 1.48 cents per kilowatt-hour for the first year. The price will be escalated at 4 percent annually for the 20-year contract period.

The city of st. albans has a unionized police force : The City of St. Albans has a unionized police force that is coming up for a contract renewal. The police have one issue: the cost of living increases. During the past 10 years, police officers have received minimal cost of living increases, and this ..

Number of labor hours used and consequent level of profit : Your specialty is delicious cheeseburger that you sell for $6.50 a piece. The cost of ingredients for each cheeseburger, such as meat, buns, tomato etc., is $1.50. You hire workers at $12 an hour. The production function for cheeseburgers is Q=40\sqr..

The woodruff corporation purchased a piece of equipment : The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation range (ADR) midpoint of 8 years. The old equipment can be sold for $90,000. A new piece of equipment can be purchased for $320,000. It ..

Context of increased competition for health care dollars : Evaluate the decision-making process and its effect within the context of increased competition for health care dollars. Assess the wide range of challenging issues that you perceive will over the next five years affect NURSING HOMES.

Business principles affect the success of a business : How do the core business principles affect the success of a business? Explain

Synthesize the concept of motivation : Synthesize the concept of motivation, and examine the substantial reasons why motivation is difficult to understand.Evaluate the potential effectiveness of the model positioning of motivation, and propose at least one (1) action that the organization..

Consumers of computers value high-quality : Consumers of computers value high-quality ones at $1,000 and low-quality ones at $100. The supply of high-quality computers is QH = PH ? 200. The supply of low-quality computers is QL = 2PL ? 100. Only sellers know the true quality of the computers b..

User Account

All Pages