The Zubair Equipment Company purchased a machine 4 years ago at a cost of $250,000....
60.1K
Verified Solution
Link Copied!
Question
Finance
The Zubair Equipment Company purchased a machine 4 years ago at a cost of $250,000. It had an expected life of 7 years at the time of purchase and an expected salvage value of $40,000 at the end of the 7 years. It is being depreciated by the straight line method toward a salvage value of $40,000. A new machine can be purchased for $650,000, including installation costs. Over its 5 year life, it will reduce cash operating expenses by $70,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. Straight line method of depreciation will be used with no salvage value. The old machine can be sold today for $55,000. The firms tax rate is 35 percent. The appropriate discount rate is 13 percent. Required: What are the Payback period, profitability index and NPV of this project? Should the firm replace the old machine?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.