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Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased two years ago
Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased two years ago at an installed cost of $60,000; it was being depreciated under MACRS, using a five-year recovery period. The existing grinder will have a usable life of five more years. The new grinder costs $105,000 and requires $5,000 in installation costs; it has a five-year usable life and will be depreciated under MACRS, using a five-year recovery period. Lombard can currently sell the existing grinder for $70,000 without incurring any removal or cleanup costs. To support the increased business resulting from purchase of the new grinder, accounts receivable will increase by $40,000, inventories by $30,000, a
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