Zero estimated salvage value on a straight line basis

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Reference no: EM13933597

Mom's Cookies Inc. is considering the purchase of a new cookie oven. The original cost of the old oven was $30,000; it is now 5 years old, and it has a current market value of $13,333.33. The old oven is being depreciated over a 10year life towards a zero estimated salvage value on a straight line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000. The old oven can be used for 6 more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected beforetax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a 5year life, and the required rate of return is 10 percent. Assume a 40 percent tax rate. What is the net present value of

Reference no: EM13933597

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