Question
In: Finance
The Cummings Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Cummings Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has been fully depreciated. The firm does not expect to realize any return from scrapping the old machine in 5 years, but can sell it now for $265,000. The new machine has a purchase price of $1,175,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $145,000. It is expected to reduce overall operating costs by $255,000 every year over the next 5 years.
The company's marginal tax rate is 35 percent and its cost of capital is 13 percent.
Should the firm purchase the new machine?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $550,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $235,000. The old machine is
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The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $550,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $235,000. The old machine is
being depreciated by $110,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $625,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $280,000. The old machine is
being depreciated by $125,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $600,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $280,000. The old machine is
being depreciated by $120,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $600,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $295,000. The old machine is
being depreciated by $120,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $575,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $250,000. The old machine is
being depreciated by $115,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $625,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $250,000. The old machine is
being depreciated by $125,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $550,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $235,000. The old machine is
being depreciated by $110,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of $650,000 and a remaining useful
life of 5 years. The firm does not expect to realize any return
from scrapping the old machine in 5 years, but it can sell it now
to another firm in the industry for $280,000. The old machine is
being depreciated by $130,000 per year, using...
The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a...
The Bigbee Bottling Company is contemplating the replacement of
one of its bottling machines with a newer and more efficient one.
The old machine has a book value of R600,000 and a remaining useful
life of 5 years. The company does not expect to realise any return
from scrapping the old machine in 5 years, but it can sell it now
to another company in the industry for R265,000. The old machine is
being depreciated by R120,000 per year, using...
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