$85,000 Installation & Commissioning $10,000 The proposed new machine is to be depreciated using the straight line method over its four-year useful life with an estimated salvage value of $15,00
Seong Seng Coachbuilders is considering purchasing a new machine to replace an old one.
Cost of new machine:
Purchase price $85,000
Installation & Commissioning $10,000
The proposed new machine is to be
The proposed new machine is expected to increase sales and operating expenses and the amount are expected to be constant over the project’s 4 year life.
Sales $65,000
Operating expenses $26,000
Seong Seng operating
Inventory $12,000
Accounts receivable $8,000
Accruals $3,000
Accounts payable $6,000
The old, existing machine is also being depreciated using the straight line method over its 6 years useful life towards zero salvage. It was purchased 2 years ago with a total depreciable value of $60,000. It can be sold today for $38,000.
Seong Seng tax bracket is 40% and its management uses 20% required
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