Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can you help me : a printing service purchased a system 5 years ago automated printing at a cost of $ 6 0 , 0

can you help me :
a printing service purchased a system 5 years ago
automated printing at a cost of $60,000. At the time of purchase, estimated life
of the machine was 7 years old and its salvage value was $6,000. These
Estimates are still valid. The machine incurs operating costs
annual of $4,000.
A new, more efficient machine would reduce operating costs to $1,000 per
year, but would require a new investment of $40,000. The useful life of the new
machine is 3 years old and its salvage value is $20,000. A buyer
is offering $10,000 for the current machine.
We also offer to rent the new machine for an annual amount of
$10,000. However, you will have to assume maintenance costs of $1,000 per year (at the end
of year). Rental payments must be made at the beginning of the year. In case of
rental, you can sell the current machine for $10,000.
Determine whether it is more economically advantageous to replace this machine,
keep it or rent one. Assume a TRAM of 12%. The tax rate
marginal of the company is 40%. Both machines are goods of the category
43.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Statement Analysis & Dividend Investing

Authors: Andrew P.C.

1st Edition

1075873940, 978-1075873942

More Books

Students also viewed these Finance questions

Question

friendliness and sincerity;

Answered: 1 week ago