B-Tel, Inc. is considering replacing their existing manufacturing unit with a new, improved unit that...
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BTel, Inc. is considering replacing their existing manufacturing unit with a new, improved unit that will cost $ million including installation and shipping costs. This will increase their annual revenue from $ million to $ million. Their annual cash costs will also increase from $ million to $ million. The life of the machinery is expected to be years and it was decided to be depreciated using straightline depreciation approach. If the company is in the tax bracket and if the applicable discount rate is should the company go ahead with the investment in the new manufacturing unit? Assume that the company can sell the existing unit for $ million, which is the book value of the unit. Annual depreciation on the existing unit is $ million. The new unit will become obsolete and be abandoned after years of usage.
BTel, Inc. is considering replacing their existing manufacturing unit with a new, improved unit that
will cost $ million including installation and shipping costs. This will increase their annual revenue
from $ million to $ million. Their annual cash costs will also increase from $ million to $
million. The life of the machinery is expected to be years and it was decided to be depreciated
using straightline depreciation approach. If the company is in the tax bracket and if the
applicable discount rate is should the company go ahead with the investment in the new
manufacturing unit? Assume that the company can sell the existing unit for $ million, which is the
book value of the unit. Annual depreciation on the existing unit is $ million. The new unit will
become obsolete and be abandoned after years of usage.
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