Answered: Rose Company is considering replacing a…

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Rose Company is considering replacing a machine with a book value of P200,000, a remaining useful life of 5 years, and annual straight-line depreciation of P40,000. The existing machine has a current market value of P200,000. The replacement machine would cost P300,000, have a 5-year-life, and save P100,000 per year in cash operating costs. The replacement machine would be depreciated using the straight-line method and the tax rate is 40%. What would be the increase in annual net cashflow if the company replaces the machine?

Select one:

a. P76,000

b. P60,000

c. P84,000

d. P68,000

Sampaguita Company is considering the sale of a machine with a book value of P80,000 and 3 years remaining it its useful life. Straight-line depreciation of P25,000 annually is available. The machine has a current market value of P100,000. What is the cash flow from selling the machine if the tax rate is 40%?

Select one:

a. P88,000

b. P92,000

c. P80,000

d. P100,000

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