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The Oviedo Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a
The Oviedo Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another years. The proposed replacement machine will perform the operation so much more efficiently that Oviedo's engineers estimate that it will produce aftertax cash flows labor savings and depreciation of $ per year. The new machine will cost $ delivered and installed, and its economic life is estimated to be years. It has zero salvage value. The firm's WACC is and its marginal tax rate is Should Oviedo buy the new machine? Oviedo purchase the new machine.
The Oviedo Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another years. The proposed replacement machine will perform the operation so much more efficiently that Oviedo's engineers estimate that it will produce aftertax cash flows labor savings and depreciation of $ per year. The new machine will cost $ delivered and installed, and its economic life is estimated to be years. It has zero salvage value. The firm's WACC is and its marginal tax rate is
Should Oviedo buy the new machine?
Oviedo purchase the new machine.
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