A die-cutting machine was purchased three years ago for $450,000. The useful life of the equipment is Estimated at eight years with a zero salvage value. The annual income earned with equipment is $190,000, operating and labor costs are $110,000 per unit. year. A new machine with increased production capacity can be purchased that would increase revenue to $250,000 per year, with operating and labor costs of $130,000. The cost of the new machine is $600,000 with a salvage value of zero and a useful life of five years. The used machine can now be sold for $300,000. The equipment is depreciated on a straight-line basis, taxes are paid at 45%, and the company's MARR is 10%. Determine the economic desirability of the replacement.
A die-cutting machine was purchased three years ago for $450,000. The useful life of the equipment is Estimated at eight years with a zero salvage value. The annual income earned with equipment is $190,000, operating and labor costs are $110,000 per unit. year. A new machine with increased production capacity can be purchased that would increase revenue to $250,000 per year, with operating and labor costs of $130,000. The cost of the new machine is $600,000 with a salvage value of zero and a useful life of five years. The used machine can now be sold for $300,000. The equipment is depreciated on a straight-line basis, taxes are paid at 45%, and the company's MARR is 10%. Determine the economic desirability of the replacement.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 14P
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A die-cutting machine was purchased three years ago for $450,000. The useful life of the equipment is Estimated at eight years with a zero salvage value. The annual income earned with equipment is $190,000, operating and labor costs are $110,000 per unit. year. A new machine with increased production capacity can be purchased that would increase revenue to $250,000 per year, with operating and labor costs of $130,000. The cost of the new machine is $600,000 with a salvage value of zero and a useful life of five years. The used machine can now be sold for $300,000. The equipment is
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