Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm purchased the current machine it uses to manufacture widgets 4 years ago. The machine cost $615,000 at that time. Today the machine is

Your firm purchased the current machine it uses to manufacture widgets 4 years ago. The machine cost $615,000 at that time. Today the machine is worth $208,000. The machine could be operated for another 6 years. 6 years from now the old machine will be worth $60,000. The old machine machine generates revenues of $685,000 per year. The old machine has operating costs of $418,000 per year. The firm has a current investment in operating net working capital of $50,000.

The firm is thinking about buying a new machine to replace the old machine. The new machine will cost $1,104,000. The new machine can be operated of 6 years. 6 years from now the new machine will have a salvage value of $177,000. The new machine will generate revenues of $940,000 per year. The new machine will have operating costs of $470,000. The new machine requires an investment in operating net working capital of $104,000.

The tax rate is 41.5%. The CCA rate is 36%. The required rate of return is 9.6%.

What is the present value of the incremental salvage value?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Science The Art Of Modeling With Spreadsheets

Authors: Stephen G. Powell, Kenneth R. Baker

3rd Edition

0470530677, 978-0470530672

More Books

Students also viewed these Finance questions