Grease Gougers International is considering replacing their existing grease gouging equipment with new equipment that has a technology that will not only be less costly to operate but will gouge more grease. The original equipment was purchased 5 years ago at a cost of $240,000 and is being depreciated using 8-year straight-line depreciation to zero. The original equipment can be sold for $70,000 today. The new equipment cost is $500,000, qualifies for the 3-year MACRS depreciation class and has a 3-year useful life. The applicable MACRS rates are 33%, 45%, 15% and 7%, respectively.<\/p>
<\/p>
The new grease gouging equipment would increase revenues $40,000 annually and would decrease operating costs (other than depreciation) by $90,000 annually. At the end of the 3-year life of this replacement analysis, the old equipment has an estimated salvage value of zero and the new equipment's salvage value is expected to be $100,000. The company's tax rate is 40% and their WACC is 16%. Also, the company expects to have enough other taxable income to write off any losses that may occur as a result of the replacement project.<\/p>
<\/p>
What is the initial cash flow (t = 0) for Grease Gouger's replacement project? Selected<\/p>
a.-$500,000<\/p>
b.-$458,000<\/p>
c.-$438,000<\/p>
d.-$430,000<\/p>
e.-$422,000<\/p>", "transcribed_text": "", "related_book": { "title": "Ethical Obligations And Decision Making In Accounting Text And Cases", "isbn": "1264135947, 9781264135943", "edition": "6th Edition", "authors": "Steven Mintz", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/2022\/04\/62500bf9812ef_11362500bf943ad3.jpg", "uri": "\/textbooks\/ethical-obligations-and-decision-making-in-accounting-text-and-cases-6th-edition-9781264135943", "see_more_uri": "" }, "free_related_book": { "isbn": "979-8860748408", "uri": "\/textbooks\/the-art-of-managing-difficult-people-techniques-for-peaceful-coexistence-1st-edition-979-8860748408-363089", "name": "The Art Of Managing Difficult People Techniques For Peaceful Coexistence", "edition": "1st Edition" }, "question_posted": "2024-06-06 18:10:04", "see_more_questions_link": "\/study-help\/questions\/business-human-resource-management-2020-May-22", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/placeplus-a-real-estate-development-firm-is-considering-several-alternative", "description": "Place-Plus, a real estate development firm, is considering several alternative development projects. 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