Question
Show work would be best. I would like to know how to do it. Thanks DeYoung Entertainment Enterprises is considering replacing the latex molding machine
Show work would be best. I would like to know how to do it. Thanks
DeYoung Entertainment Enterprises is considering replacing the latex molding machine it uses to fabricate rubber chickens with a newer, more efficient model. The old machine has a book value of $450,000 and a remaining useful life of 5 years. The current machine would be worn out and worthless in 5 years, but DeYoung can sell it now to a Halloween mask manufacturer for $1 35,000. The old machine is being depreciated by $90,000 per year, using the straight-line method.
The new machine has a purchase price of $775,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $105,000. The applicable depreciation rates are 20.00%, 32.00%, 1 9.20%, 11 .52%, 11 .52%, and 5.76%. Being highly efficient, it is expected to economize on electric power usage, labor, and repair costs, and, most importantly, to reduce the number of defective chickens. In total, an annual savings of $185,000 will be realized if the new machine is installed. The companys marginal tax rate is 35%, and it has a 1 2% WACC.
What is CF1?
a. | 154,000 | |
b. | 187,000 | |
c. | 143,000 | |
d. | 196,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started