Solution-What the net present value to be provided

What the net present value to be provided

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Problem - Tabucol Aggregates, Inc. plans to replace one of its machines with a new efficient one. The old machine has a net book value of P120,000 with remaining economic life of 4 years. This old machine can be sold for P80,000. If the new machine were acquired, the cash operating expenses will be reduced from P240,000 to P160,000 for each of the four years, the expected economic life of the new machine. The new machine will cost Tabucol a cash payment to the dealer of P300,000. The company is subject to 32 percent tax and for this kind of investment, a marginal cost of capital of 9 percent. The present value of annuity of 1 and the present value of 1 for 4 periods using 9 percent are 3.23972 and 0.70843, respectively. What the net present value to be provided by the replacement of the old machine?

Reference no: EM132939437

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What the net present value to be provided

Reference no: EM132939437

Reference no: EM132939437

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