Three years ago, Silver House Steel purchased a new quenching system for $550,000. The salvage value after
Question:
Three years ago, Silver House Steel purchased a new quenching system for $550,000. The salvage value after 10 years at that time was estimated to be $50,000. Currently the expected remaining life is 7 years with an AOC of $27,000 per year. The new president has recommended early replacement of the system with one that costs $400,000 and has a 12-year life, a $35,000 salvage value, and an estimated AOC of $50,000 per year. The MARR for the corporation is 12% per year. The president wishes to know the replacement value that will make the recommendation to replace now economically advantageous. Use a spreadsheet and Solver to find the minimum trade-in value
(a) Before taxes
(b) After taxes, using an effective tax rate of 30%. For solution purposes, use classical SL depreciation for both systems. Comment on the difference in replacement value made by the consideration of taxes.
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A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
a Before taxes Spreadsheet is similar to Figure 178 with RV in a separate cell D1 from defender firs...View the full answer
