Question
Need to see how this is done in Excel Although the Chen Companys milling machine is old, it is still in relatively good working order
Need to see how this is done in Excel
Although the Chen Companys milling machine is old, it is still in relatively good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110,000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It would have zero salvage value at the end of its life. The firms WACC is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
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