Question
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current
The supervisor of the county Department of Transportation (DOT) is considering the replacement of some machinery. This machinery has zero book value but its current market value is $920. One possible alternative is to invest in new machinery, which has a cost of $40,200. This new machinery would produce estimated annual operating cash savings of $13,100. The estimated useful life of the new machinery is four years. The DOT uses straight-line depreciation. The new machinery has an estimated salvage value of $2,120 at the end of four years. The investment in the new machinery would require an additional investment in working capital of $3,000, which would be recovered after four years. If the DOT accepts this investment proposal, disposal of the old machinery and investment in the new equipment will take place on December 31, 20x1. The cash flows from the investment will occur during the calendar years 20x2 through 20x5.
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Future Value and Present Value Tables Table I 1.651 2.144 .100 11 206 21 75 45360 1161 Table II 2.100 2120 Table III 1 + n 14.577 .340 26e 206 .160 .1.039 CO'8 .002 .040 .089 .082 25 40208.046 . 2 011.006 ton .001 co! Table IV 2 1.888 1f03 1.7 17: 1.680 1.647 15 11.520 1A92 167 1.440 1A24 1 1.M1 4 3Al5 a312 31,0 a(G 2914 2198 2w zseg 2A94 2404 2362 2320 2241 2100 5 4452 212 3 36 3433 3274 3127 280 20 275 28 2R5 2Se 24 2485 2 8 6733 6210 GT47 G408 4,630 4344 4078 3.537 3.013 3421 a329 3241 a076 200, 4031 3. 38 3.1 4035 3 12 85-8.384 7. G814 0.104 5.000 0.197 47Ba 4439 4.127 31 a725 3005 3387 a190 3550 18530 11 3a42 a
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