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Mom s Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $ 4 5 ,
Moms Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $; it is now five years old, and it has a current market value of $ The old oven is being depreciated over a year life toward a zero estimated salvage value on a straightline basis, resulting in a current book value of $ and an annual depreciation expense of $ The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $ and whose estimated salvage value is zero. Expected beforetax cash savings from the new oven are $ a year over its life, you can use bonus depreciation on the oven, and the cost of capital is percent. Assume a percent tax rate.
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