Question
In: Finance
The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $230,000. It has an asset depreciation range (ADR)
midpoint of eight years. The old equipment can be sold for
$85,500.
A new piece of equipment can be purchased for $322,000. 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:
|
The firm has a 25 percent tax rate and a 9 percent cost of capital.
1. What is the net cost of the new equipment?
2.What is the present value of incremental benefits?
What is the NPV of this replacement decision?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an...
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...
The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $230,000. It has an asset depreciation range (ADR)
midpoint of eight 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 eight years. Assume the old and new equipment would
provide the following operating gains (or losses) over the next six
years. Question: The firm has a 25 percent tax rate and a...
The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $230,000. It has an asset depreciation range (ADR)
midpoint of eight 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 eight years.
Ye
New Equipment
Old
Equipment
Year
1
$80,000
$25,000
1
2
76,000
16,000
2
3
70,000
9,000
3
4
60,000
8,000
4
5
50,000
6,000
5
6
45,000
(7,000)
6...
The Woodruff Corporation purchased a piece of equipment three years ago for $233,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $233,000. It has an asset depreciation range(ADR)
midpoint of 8 years. The old equipment can be sold for $94000. A
new piece of equipment can be purchased for $335,500. 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 six
years:
Year New Equipment Old Equipment
1 $78,750 $26,000
2 $76,250 $14,500
3 $68,250...
The Woodruff Corporation purchased a piece of equipment three years ago for $245,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $245,000. It has an asset depreciation range (ADR)
midpoint of eight years. The old equipment can be sold for
$87,750.
A new piece of equipment can be purchased for $336,000. 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.
New Equipment
Old Equipment
$78,250
$24,000
$74,750
$17,000
$70,000
$8,000
$60,750...
The Woodruff Corporation purchased a piece of equipment three years ago for $248,000. It has an...
The Woodruff
Corporation purchased a piece of equipment three years ago for
$248,000. It has an asset depreciation range (ADR) midpoint of
eight years. The old equipment can be sold for $93,250.
A new piece of equipment can be purchased for $324,000. 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:
Year
New Equipment
Old Equipment
1...............
$81,500
$24,000
2...............
76,000...
The Woodruff Corporation purchased a piece of equipment three years ago for $238,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $238,000. It has an asset depreciation range (ADR)
midpoint of eight years. The old equipment can be sold for
$85,250.
A new piece of equipment can be purchased for $340,000. 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:
Year
New Equipment
Old Equipment
1...............
$78,250
$25,500
2...............
75,000...
The Woodruff Corporation purchased a piece of equipment three years ago for $229,000. It has an...
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:
Year
New Equipment
Old Equipment
1...............
$82,000
$24,250
2...............
75,750...
The Woodruff Corporation purchased a piece of equipment three years ago for $221,000. It has an...
The Woodruff
Corporation purchased a piece of equipment three years ago for
$221,000. It has an asset depreciation range (ADR) midpoint of
eight years. The old equipment can be sold for $92,250.
A new piece of equipment can be purchased for $334,000. 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:
Year
New Equipment
Old Equipment
1...............
$81,000
$23,500
2...............
75,000...
The Woodruff Corporation purchased a piece of equipment three years ago for $240,000. It has an...
The Woodruff Corporation purchased a piece of equipment three
years ago for $240,000. It has an asset depreciation range (ADR)
midpoint of eight years. The old equipment can be sold for
$89,000.
A new piece of equipment can be purchased for $320,500. 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:
Year
New Equipment
Old Equipment
1...............
$81,250
$27,000
2...............
77,500...
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