Question
McMaster Fast Foods are evaluating the possibility of purchasing new milk shake equipment in their 10 cafes. The total cost of the new equipment would
McMaster Fast Foods are evaluating the possibility of purchasing new milk shake equipment in their 10 cafes. The total cost of the new equipment would be $30,000 plus $2,000 in installation costs. There will be no increase in revenue if the new equipment is purchased, but costs will decrease by $10,000 for each of the four years of the life of the new equipment. The new equipment will be depreciated at 30 percent diminishing value. The system will have no salvage value at the end of the four year life. The company tax rate is 30 percent. The terminal value attributable to the new equipment is?
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