Solution-What is the net cost of the new equipment

What is the net cost of the new equipment

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Reference no: EM132543451

The Woodruff Corporation purchased a piece of equipment three years ago for $229,000. It has an asset depreciation range (ADR) midpoint of eight years. The old equipment can be sold for $86,000.

A new piece of equipment can be purchased for $315,500. It also has an ADR of eight years.

Assume the old and new equipment would provide the following operating gains (or losses) over the next six years:

YearNew EquipmentOld Equipment1......$82,000$24,2502..........75,75015,7503.........69,0007,2504........59,5006,2505.........51,2507,5006........45,500-6,500

The firm has a 25 percent tax rate and a 9 percent cost of capital.

What is the net cost of the new equipment?

What is the present value of incremental benefits?

What is the NPV of this replacement decision?

Reference no: EM132543451

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What is the net cost of the new equipment

Reference no: EM132543451

Reference no: EM132543451

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