Woodruff COMPREHENSIVE PROBLEM The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. Corporation It has an asset depreciation range (ADR) midpoint of eight years. The old equipment (Replacement can be sold for $90,000. decision analysis) A new piece of equipment can be purchased for $320,000. It also has an ADR of (LO12-4) eight years. Chapter 12 The Capital Budgeting Decision Assume the old and new equipment would provide the following operating gains (or losses) over the next six years: Year 1 w N New Equipment $80,000 76,000 70,000 60,000 50,000 45,000 Old Equipment $25,000 16,000 9,000 8,000 6,000 (7,000) 4 5 The firm has a 25 percent tax rate and a 9 percent cost of capital. Should the new equipment be purchased to replace the old equipment? WEB EXERCISE 1. Texas Instruments was referred to in the chapter as being an innovator in the calculator industry. But that is only one of its products. Let's see how this large company is doing today. Go to finance.yahoo.com and in the Quote Lookup" box type TXN and select Texas Instruments Incorporated. 2. Click on Profile. Write a one-paragraph description of its major operations. 3. Returning to TXN's summary page, record the following: a. Last trade price b. 52-week low c. 52-week high 4. Now click on "Chart and scroll down to see the pattern for the last year. Scroll up and click on 5Y and scroll down to the summary data for five years. Finally, click on Comparison and select the S&P 500 (Standard & Poor's 500 Stock Index). Scroll down and review the summary data for that period. Write a paragraph describing TXN's stock performance. Note: Occasionally a topic we have listed may have been deleted, updated, or moved into a different location on a website. If you click on the site map or site index, you will be introduced to a table of contents that should aid you in finding the topic you are looking for. Woodruff COMPREHENSIVE PROBLEM The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. Corporation It has an asset depreciation range (ADR) midpoint of eight years. The old equipment (Replacement can be sold for $90,000. decision analysis) A new piece of equipment can be purchased for $320,000. It also has an ADR of (LO12-4) eight years. Chapter 12 The Capital Budgeting Decision Assume the old and new equipment would provide the following operating gains (or losses) over the next six years: Year 1 w N New Equipment $80,000 76,000 70,000 60,000 50,000 45,000 Old Equipment $25,000 16,000 9,000 8,000 6,000 (7,000) 4 5 The firm has a 25 percent tax rate and a 9 percent cost of capital. Should the new equipment be purchased to replace the old equipment? WEB EXERCISE 1. Texas Instruments was referred to in the chapter as being an innovator in the calculator industry. But that is only one of its products. Let's see how this large company is doing today. Go to finance.yahoo.com and in the Quote Lookup" box type TXN and select Texas Instruments Incorporated. 2. Click on Profile. Write a one-paragraph description of its major operations. 3. Returning to TXN's summary page, record the following: a. Last trade price b. 52-week low c. 52-week high 4. Now click on "Chart and scroll down to see the pattern for the last year. Scroll up and click on 5Y and scroll down to the summary data for five years. Finally, click on Comparison and select the S&P 500 (Standard & Poor's 500 Stock Index). Scroll down and review the summary data for that period. Write a paragraph describing TXN's stock performance. Note: Occasionally a topic we have listed may have been deleted, updated, or moved into a different location on a website. If you click on the site map or site index, you will be introduced to a table of contents that should aid you in finding the topic you are looking for
