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In: Finance
St. johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
- St. johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $46,000 per year. The new machine will cost $80,000, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm’s WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $30,000 to $44,000 per year. The
new machine will cost $82,500, and it will have an estimated life
of 8 years and no salvage value. The new riveting machine is
eligible for 100% bonus depreciation at the time of purchase. The
applicable corporate tax rate is 25%, and the firm's WACC is 14%.
The old machine...
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $30,000 to $52,000 per year. The
new machine will cost $87,500, and it will have an estimated life
of 8 years and no salvage value. The new riveting machine is
eligible for 100% bonus depreciation at the time of purchase. The
applicable corporate tax rate is 25%, and the firm's WACC is 16%.
The old machine...
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $27,000 to $52,000 per year. The
new machine will cost $82,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate is...
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $30,000 to $56,000 per year. The
new machine will cost $90,000, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate is...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering
the replacement of an 8-year-old riveting machine with a new one
that will increase earnings before depreciation from $27,000 to
$56,000 per year. The new machine will cost $82,500, and it will
have an estimated life of 8 years and no salvage value. The new
machine will be depreciated over its 5-year MACRS recovery period,
so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%,
and 6%. The applicable corporate tax...
12. St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a...
12.
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $30,000 to $46,000 per year. The
new machine will cost $80,000, and it will have an estimated life
of 8 years and no salvage value. The new riveting machine is
eligible for 100% bonus depreciation at the time of purchase. The
applicable corporate tax rate is 25%, and the firm's WACC is 12%.
The old...
Q10 St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a...
Q10
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $24,000 to $48,000 per year. The
new machine will cost $90,000, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate...
Q 10 St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with...
Q 10
St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $27,000 to $52,000 per year. The
new machine will cost $82,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax...
St.Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one...
St.Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $22,000 to $56,000 per year. The
new machine will cost $100,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate is 35%,...
Replacement analysis Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a...
Replacement analysis
Mississippi River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $24,000 to $48,000 per year. The
new machine will cost $82,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period; so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate...
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