Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

Hayden Inc. has a number of copiers that were bought four years ago for $39,000. Currently maintenance costs $3,900 a year, but the machines have

image text in transcribed
Hayden Inc. has a number of copiers that were bought four years ago for $39,000. Currently maintenance costs $3,900 a year, but the machines have a current resale value of $9,900, but at the end of year 2 , ther value will have fallen to $5,400. By the end of year 6 . the machines will be valueless and would be scrapped. Haytien is considering renlacinn the coniers wath new machines that would do essentially the same job. These machines cost $344,000, and the company can take out an eight-year maintenance contract for $1,900 a year. The machines would have no value by the end of the elghtyears and would be scrapped. Both machines are depreciated using seven-year straight-line depreciation, and the tax rate is 35%. Assume for simplicity that the inflation rate is zero. The real cost of capital is 7% a. Calculate the equivalentannual cost, if the coplers are: (i) replaced now, (1) replaced two years from now, or (iil) replaced spx years from now. (Do not round intermediate calculations, Enter your answers as o positive volue rounded to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions