Question
SafeHaven Inc.is considering purchasing new equipment to replace existing equipment that has book value of zero and market value of $75,000 today and is expected
SafeHaven Inc.is considering purchasing new equipment to replace existing equipment that has book value of zero and market value of $75,000 today and is expected to be worthless in 10 years. New equipment costs $450,000 and is expected to provide production savings and increased profits of $100,000 per year for the next 10 years. New equipment has expected useful life of 10 years, after which its estimated salvage value would be $50,000.New equipment will be straight-line depreciated to zero in 10 years. Companys effective tax rate is 35% and required rate of return is 10%. What is the year 10 net capital spending (NCS) for this replacement project? Question 7 options: $50,000 $17,500 $75,000 $0 $32,500
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