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Whispering Cleaners is considering replacing one of its tired cleaning machines for a new model that can dry-clean clothes in half the time of the
Whispering Cleaners is considering replacing one of its tired cleaning machines for a new model that can dry-clean clothes in half the time of the old machine. Both the book value and the salvage value of the current machine are $2,660; the current machine would be sold if the new machine is purchased. The new machine would cost $19,800 and is expected to last 15 years, at which point it would be sold for its salvage value of $1,980. It would generate additional net operating cash flows of $4,580 each year of its useful life. Whispering Cleaners estimates its tax rate to be 25%, while its required rate of return is 8%. Click here to view the factor table Outline the appropriate cash flows-including the depreciation tax shield, timing, adjustment for taxes, and appropriate PV factor for each component of this equipment-replacement scenario. (Round present value factor answers to 5 decimal places, e.g. 1.25124. Round tax rate and present value to 2 decimal places, e.g. 0.15 or 15.25 . Enter negative amounts using either a negative sign preceding the number, e.g. -45 or parentheses, e.g. (45).)
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