7) "REPLACEMENT DECISIONS" A. Replacement of a worn out asset (i) Replacement of a worn out asset that has a sale value ABC Company has worn-out equipment that can be sold for scrap at a price equal to its book value of $1,000. A new equipment costs $15,230. The new equipment has an estimated physical life of 10 years. It will generate earnings before depreciation and taxes of $5,000 a year and it could be salvaged for its book value. The equipment has a CCA rate of 25%. ABC's marginal tax rate is 40% and its cost of capital is 10%. Determine the project NPV. (ii) Replacement of a worn out asset that has a trade-in value different from the sale value ABC Company has worn-out equipment that can be sold for scrap at a price equal to its book value of $1,000. Alternately, a dealer will allow a $1,230 trade-in on the cost of new $15,230 equipment. The new equipment has an estimated physical life of 10 years. It will generate earnings before depreciation and taxes of $5,000 a year and it could be salvaged for its book value. The equipment has a CCA rate of 25%. ABC's marginal tax rate is 40% and its cost of capital is 10%. Determine the project NPV 7) "REPLACEMENT DECISIONS" A. Replacement of a worn out asset (i) Replacement of a worn out asset that has a sale value ABC Company has worn-out equipment that can be sold for scrap at a price equal to its book value of $1,000. A new equipment costs $15,230. The new equipment has an estimated physical life of 10 years. It will generate earnings before depreciation and taxes of $5,000 a year and it could be salvaged for its book value. The equipment has a CCA rate of 25%. ABC's marginal tax rate is 40% and its cost of capital is 10%. Determine the project NPV. (ii) Replacement of a worn out asset that has a trade-in value different from the sale value ABC Company has worn-out equipment that can be sold for scrap at a price equal to its book value of $1,000. Alternately, a dealer will allow a $1,230 trade-in on the cost of new $15,230 equipment. The new equipment has an estimated physical life of 10 years. It will generate earnings before depreciation and taxes of $5,000 a year and it could be salvaged for its book value. The equipment has a CCA rate of 25%. ABC's marginal tax rate is 40% and its cost of capital is 10%. Determine the project NPV