The Scotty Corporation, maker of Scotty's electronic components, is considering replacing one of its current hand-operated assembly machines with a new fully automated machine. This replacement would mean the elimination of one employee, generating salary and benefit saving. Given the following information, determine the cash flows associated with this replacement. Existing situation: One full-time machine operator --- salary and benefits, $25,000 per year Cost of maintenance -- $2,000 per year Cost of defects $6,000 per year Original depreciable value of old machine --- -- $50,000 Annual depreciation --- $5,000 per year Expected life-10 years Age 5 years old Expected salvage value in 5 years --- $0 Current salvage value --- --- $5,000 Marginal tax rate --- 34 percent --- ---

The Scotty Corporation, maker of Scotty's electronic components, is considering replacing one of its current hand-operated assembly machines with a new fully automated machine. This replacement would mean the elimination of one employee, generating salary and benefit saving. Given the following information, determine the cash flows associated with this replacement. Existing situation: One full-time machine operator --- salary and benefits, $25,000 per year Cost of maintenance -- $2,000 per year Cost of defects $6,000 per year Original depreciable value of old machine --- -- $50,000 Annual depreciation --- $5,000 per year Expected life-10 years Age 5 years old Expected salvage value in 5 years --- $0 Current salvage value --- --- $5,000 Marginal tax rate --- 34 percent --- ---

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 18P: Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...

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