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Malik's has a number of copiers that were bought two years ago for $23,000. Maintenance costs of $1,800 will be for the remaining 3 years
Malik's has a number of copiers that were bought two years ago for $23,000. Maintenance costs of $1,800 will be for the remaining 3 years life of the machines. The machines have a current market value of $17.000 but at the end of year 2 their value will have fallen to $10.500 and be valueless at the end of year 3 when they are scrapped Malik's is considering replacing the machines with new ones that would do essentially the same job. These machines cost $18,500 and come with a five-year maintenance contract for $1000 a year. The machines will depreciate to zero after 5 years and will be scrapped then. Both machines are depreciated using straight line depreciation for five years with zero salvage value. The cost of capital is 7% and the tax rate is 25% What is the equivalent annual value of the old machine? 800 -250
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