Time, years Pretax revenue, E Resale value, S SO S50,000 1 $22,000 S18,000 S14,000 S38,000 S27,000 S17,000 $8,000 3 S12,000 SI0 000 SO

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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 A company has decided to buy a machine for  $50,000. It will depreciate the machine on a straight-line basis over its useful life of five years. The tax rate of the company is 40% and the proper discount rate 10%. The following tables gives the resale value, S of the machine and its pretax revenue, E.
 The company has the option to keep or sell the machine at any time. What is the optimal time to replace the machine?  

 

Time, years Pretax revenue, E Resale value, S
S50,000
S38,000
S27,000
S17,000
so
$22,000
$18,000
$14,000
2
4
$12,000
$10,000
$8,000
5
SO
Transcribed Image Text:Time, years Pretax revenue, E Resale value, S S50,000 S38,000 S27,000 S17,000 so $22,000 $18,000 $14,000 2 4 $12,000 $10,000 $8,000 5 SO
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