2 Purchase priceAccumulateddepreciationAnnual operatingcosts$312000Ⓒ$(99000)$124800$85000.Ⓒ$(22000)124800411000$512000-0-330000If the old equipment is replaced now, it can be sold for $85000. Both the old equipment's remaining useful life and the newequipment's useful life is 5 years.The increase (decrease) in net income over the 5-year period that results from replacing the old equipment with the new equipment is

Solution: Please referred answer below the correct option is ($22000) Detailed answer : 1) If Old…

Answered: $(22000)

Business

Accounting

$(22000)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 1P

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Purchase price
Accumulated
depreciation
Annual operating
costs
$312000
Ⓒ$(99000)
$124800
$85000.
Ⓒ$(22000)
124800
411000
$512000
-0-
330000
If the old equipment is replaced now, it can be sold for $85000. Both the old equipment's remaining useful life and the new
equipment's useful life is 5 years.
The increase (decrease) in net income over the 5-year period that results from replacing the old equipment with the new equipment is

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