Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

eBook Problem Walk-Through Problem 11-10 Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However,

image text in transcribed

eBook Problem Walk-Through Problem 11-10 Replacement Analysis St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. The new welder will cost $82,000 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $26,000 to $52,000 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the project cost of capital is 12%. Should the old welder be replaced by the new one? Old welder shouldbe replaced. What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest cent. Hide Feedback Partially Correct

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_2

Step: 3

blur-text-image_3

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

ABC Finance Coloring Book Familys First Financial Literacy Book

Authors: Jason Conger

1st Edition

1955961026, 978-1955961028

More Books

Students also viewed these Finance questions

Question

Write a research document on data protection

Answered: 1 week ago