Purchase Solution

possible alternatives to replace existing machinery

Not what you're looking for?

Ask Custom Question

The table below details three possible alternatives to replace existing machinery. The life of each alternative is 10 years. Assuming the cost of capital is 10% , depreciation for tax purposes of capital expenditure is allowable at 30% on a declining balance basis and the effective tax rate is 45% . Determine the preferred alternative.15. An item of equipment is to be purchased for $250,000. The anticipated operating costs, maintenance costs and salvage values for each year are detailed in the table overleaf. Determine the economic life of the equipment. It may be assumed that the cost of capital is 10%, depreciation for tax purposes of capital expenditure is allowable at 30% on a declining balance basis and the effective tax rate is 45%.

Attachments
Purchase this Solution
Solution Summary

Determine the economic life of the equipment.

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
Recent Feedback
  • "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
  • "thank you!"
  • "Thank you again Jayant. You are super fast. "
  • "Thank you Jayant. You are appreciated. "
  • "Again, thank you Jayant. You are wonderful. "
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Average Carrying Value/ Investment; Salvage Value; Payback Period, etc.

    Bronson Company is considering replacing an existing piece of machinery with newer technology. In deciding whether to replace the existing machinery, management should consider which costs as relevant? a.

  • Calculate NPV, IRR for project; evaluate a capital budgeting

    Comprehensive Capital Budgeting Problem You are asked to evaluate a new product line to replace an existing product that is at the end of its product life cycle.

  • Sensitivity analysis

    259793 Sensitivity analysis The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment cost $9 million (the existing equipment has zero salvage value).

  • Alternatives to Cloud Technology

    Should You Move Your Small Business to the Cloud? Retrieved on April 29, 2013 from http://www.pcworld.com/article/188173/should_you_move_your_business_to_the_cloud.html. Shelton, CT (2013). Cloud Computing and its Possible Alternatives.

  • Solution to Animal Testing Practices

    A recommended solution is to use the 3Rs method: Replace, Reduce and Refine Replace: To substitute the use of animals in toxicological testing with alternatives ie. cell cultures or assays, in-silico testing (computer modelling and simulation) Reduce

  • Replacement Analysis using expected values

    One particular device has reached maturity, and the company is considering whether to replace it with a newer model.

  • Various questions on Differential Analysis

    The original cost and accumulated depreciation were incurred in the past and are irrelevant to the decision to replace the machine. 12-8 a. Proposal to Replace Machine January 20, 2006 Annual costs and expenses—present machine

  • New machinery was installed to replace a number of employees

    408389 New machinery was installed to replace a number of employees, who were paid an extra month's wages and dismissed. This amount was added to the cost of the machinery. Discuss the propriety of the charge.

  • Clearaway Upholstery: calculate investment alternatives for cash flows

    At the end of five years, the machine could be sold to net $8000 before taxes. Alternative Two Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000.

View More Related Solutions