Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available

image text in transcribed

Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available from a public utility. The company has computed depreciation by the straight-ine method with a useful life of 10 years and a zero salvage value. Annual operation and maintenance expenses are $16,000, and property taxes and insurance cost another $3, 300 per year. Dependable electric service is now available at an estimated annual cost of $25,000. The company in New Jersey wishes to know whether it would be more economical to dispose of the diesel-electric unit now, when it can be sold for $38,000, or to wait five years when the unit would have to be replaced anyway (with no MV). The company has an effective income tax rate of 50% and tries to limit its capital expenditures to opportunities that will earn at least 12% per year after income taxes. What would you recommend? Click the icon to view the interest and annuity table for discrete compounding when MARRE = 12% per year. The AW value for the defender is $ ___. (Round to the nearest dollar.)

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

Crypto Finance Law And Regulation

Authors: Joseph Lee

1st Edition

0367086611, 978-0367086619

More Books

Students also viewed these Finance questions

Question

please dont use chat gpt AI 3 8 0 . .

Answered: 1 week ago