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mod10 1 Milling, Inc. is considering a new milling machine. The machine costs $125,000. They can received a $15,000 trade in allowance for the old
mod10 1 Milling, Inc. is considering a new milling machine. The machine costs $125,000. They can received a $15,000 trade in allowance for the old milling machine. The new machine can be used to generate $35,500 in annual revenue. Cash operation expenses are estimated to be $14,500 per year. The machine has a useful life of 15 years and annual depreciation expense would be $9,500. The machine would require a $5,100 maintenance in year 7 . The machine has an approximate salvage value of $12,300 at the end of its useful life. The company has a 10% minimum rate of return. Is the annual depreciation expense of $9,500 used in the net present value computation? Yes, depreciation expense is used. Depreciation expense is used because all expenses must be considered even if they are not cash. No, depreciation expense is ignored. Depreciation expense is not a cash expense and this method only considers cash inflows and outflows
mod10 1
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