Question
In: Finance
Two years ago, Sun company purchased a machine for $120,000. The company has learned that a...
Two
years ago, Sun company purchased a machine for $120,000. The
company has learned that a new machine is available for $145,000
today. It will be depreciated on a straight-line basis over 10
years and has no salvage value. Sun Company expects that the new
machine will produce earnings of $45,000 per year for the next 10
years. The old machine is expected to produce earnings of $25,000
per year. The old machine is being depreciated on a straight-line
basis over a useful life of 11 years, and has no salvage value. The
market value today of the old machine is $65,000. Sun Company's tax
rate is 40%, and the cost of capital for this type of equipment is
10%. What is the NPV of replacing the old machine?
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jeff jeffy answered 1 year agoRelated Solutions
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $120,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$160,000 today. It will be depreciated on a straight-line basis
over ten years, after which it has no salvage value. You expect
that the new machine will contribute EBITDA (earnings before
interest, taxes, depreciation, and amortization) of $40,000 per
year for the next ten years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $120,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$200,000 today. It will be depreciated on a straight-line basis
over 5 years, after which it has no salvage value. You expect that
the new machine will produce EBITDA (earnings before interest,
taxes, depreciation, and amortization) of $100,000 per year for the
next 5 years. The current machine is...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $120,000. You have learned that a new machine is
available that offers many advantages and that you can purchase it
for $150,000 today. The CCA rate applicable to both machines is
20%; neither machine will have any long-term salvage value. You
expect that the new machine will produce earnings before interest,
taxes, depreciation, and amortization (EBITDA) of $60,000 per
year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for
$120,000.
You have learned that a new machine is available that offers
many advantages and you can purchase it for
$160,000
today. It will be depreciated on a straight-line basis over 10
years and has no salvage value. You expect that the new machine
will produce a gross margin (revenues minus operating expenses
other than depreciation) of
$35,000
per year for the next 10 years. The current machine...
One year ago, your company purchased a machine used in manufacturing for $120,000. You have learned...
One year ago, your company purchased a machine used in
manufacturing for $120,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$140,000 today. It will be depreciated on a straight-line basis
over 10 years, after which it has no salvage value. You expect that
the new machine will produce EBITDA (earning before interest,
taxes, depreciation, and amortization) of $40,000 per year for the
next 10 years. The current machine is...
Two years ago, a company purchased a machine. Currently, the machine can be sold for Rs....
Two years ago, a company purchased a machine. Currently, the
machine can be sold for Rs. 2500 having a book value of Rs. 2100.
The remaining life of the machine is 6 years and is depreciated
using a straight-line depreciation method. Therefore, it records
Rs. 350 per year as an annual depreciation expense. The company may
sell the machine for Rs. 500 after it completes its useful life if
it is not replaced with a new one which is technologically...
Two years ago, a company purchased a machine. Currently, the machine can be sold for Rs....
Two years ago, a company purchased a machine. Currently, the
machine can be sold for Rs. 2500 having a book value of Rs. 2100.
The remaining life of the machine is 6 years and is depreciated
using a straight-line depreciation method. Therefore, it records
Rs. 350 per year as an annual depreciation expense. The company may
sell the machine for Rs. 500 after it completes its useful life if
it is not replaced with a new one which is technologically...
Five years ago, your company purchased a machine used in manufacturing for $110,000. You have learned...
Five years ago, your company purchased a machine used in
manufacturing for $110,000. You have learned that a new machine is
available that offers many advantages; you can purchase it for
$150,000 today. It will be depreciated on a straight-line basis
over ten years and has no salvage value.
You expect that the new machine will reduce the current
investment in working capital by $10,000.
The current machine is being depreciated on a straight-line
basis over a useful life of...
Q. 1: Two years ago, a company purchased a machine. Currently, the machine can be sold...
Q. 1: Two years ago, a company purchased a
machine. Currently, the machine can be sold for Rs. 2500 having a
book value of Rs. 2100. The remaining life of the machine is 6
years and is depreciated using a straight-line depreciation method.
Therefore, it records Rs. 350 per year as an annual depreciation
expense. The company may sell the machine for Rs. 500 after it
completes its useful life if it is not replaced with a new one
which...
The XYZ Company purchased a specialized machine three years ago for $25,000. This machine is not...
The XYZ Company purchased a specialized machine three years ago
for $25,000. This machine is not readily resalable and thus assumed
to have a salvage value of $0. Operating costs are expected to be
$10,000 next year and to increase by $800 per year thereafter (the
‘G’ term). The company has an opportunity to replace this machine
with another specialized one for a cost of $12,000. This machine
also has no salvage value, a useful life of 10 years, and...
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