Business
Engineering
Math
Science
Social Science
Fundamentals of Financial Manageme...
Solutions
Fundamentals of Financial Manageme...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $46,000 per year. The new machine will cost $80,000; and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 10%. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one? Explain your answer.
To explain: Whether the proposal of a new machine is acceptable or not.
Introduction:
Replacement Analysis:
The analysis for the replacement of the company’s assets is the replacement analysis. To reduce the cost of the company the management take decision to replace the existing asset. The incremental cash flow is calculated while taking replacement decision.
Net present Value (NPV):
NPV is the technique of capital budgeting. To select the project or not to select the project depends on the NPV of the project. If the project has positive NPV then accept the project, if the NPV is negative then reject the project.
Life of old machine 8years
New machine increases the earnings before depreciation from $24,000 to $46,000 per year
The cost of new machine is $ 80,000
No salvage value
5 year MACRS depreciation rate are, 20%, 32%, 19%, 12%, 11%, and 6%.
Tax rate 40%
WACC is 10 %
Chapter 12 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addEXCHANGE RATES Table 19.1 lists foreign exchange rakes for August 25, 2017. On that day, how many dollars would...
Fundamentals of Financial Management (MindTap Course List)
In the text, we discussed using the discounted dividend model to estimate a stocks intrinsic value. To keep thi...
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Internal control of cash receipts The procedures used for over-the-counter receipts are as follows. At the clos...
Financial & Managerial Accounting
Are the following statements true or false? Explain in each case. a. Two countries can achieve gains from trade...
Principles of Microeconomics (MindTap Course List)
The accompanying frequency distribution of fracture strength (MPa) observations for ceramic bars fired in a par...
Probability and Statistics for Engineering and the Sciences
Why is productivity important?
Principles of Economics (MindTap Course List)
What are the main advantages and disadvantages of using a centralized database approach when designing and impl...
Accounting Information Systems
How can team conflict be reduced?
Foundations of Business (MindTap Course List)
Exercise 9-83 Installment Notes Refer to the information for Dandy Candy above Required; Prepare the amortizati...
Cornerstones of Financial Accounting
Do the terms debit and credit signify increase or decrease or can they signify either? Explain.
Corporate Financial Accounting
The Hawaii Visitors Bureau collects data on visitors to Hawaii. The following questions were among 16 asked in ...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
A tax on a good has a deadweight loss if a. the reduction in consumer and producer surplus is greater than the ...
Principles of Macroeconomics (MindTap Course List)
(Costs in the Short Run) Identify each of the curves in the following graph:
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
According to the quantity theory of money, which variable in the quantity equation is most stable over long per...
Brief Principles of Macroeconomics (MindTap Course List)
Linked In is the acknowledged No. I site for job seekers and recruiters. Its free and easy to join. Even if you...
Essentials of Business Communication (MindTap Course List)
Rate each of the following questions according to the Following scale: 1 I am never like this. I am rarely like...
Management, Loose-Leaf Version
What are the major advantages of leasing a fixed asset rather than purchasing it?
Financial And Managerial Accounting
Wig Creations Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest....
Financial Accounting
Explain how relation-ship marketing can move customers up the loyalty ladder.
Contemporary Marketing
Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or...
Essentials of Economics (MindTap Course List)
CLOSING ENTRIES (NET INCOME) Using the following partial listing of T accounts, prepare closing entries in gene...
College Accounting, Chapters 1-27
Identify the various ways of entering the global marketplace
MKTG 12:STUDENT ED.-TEXT
Why is it important to periodically take a physical inventory when using a perpetual inventory system?
Financial & Managerial Accounting
What is interperiod tax allocation?
Intermediate Accounting: Reporting And Analysis
Which of the following is an advantage of the cash payments journal? a. It provides notification of early payme...
College Accounting (Book Only): A Career Approach
What is the fundamental concept behind the rule of least access? Explain why this is a potential problem in an ...
Accounting Information Systems
A tractor acquired at a cost of 420,000 has an estimated residual value of 30,000, has an estimated useful life...
Financial Accounting
Which of the following is a true statement about activity-based supplier costing? a. The cost of a supplier is ...
Managerial Accounting: The Cornerstone of Business Decision-Making
WACC The Patrick Companys year-end balance sheet is shown below. Its cost of common equity is 16%, its before-t...
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Target costing Toyota Motor Corporation uses target costing. Assume that Toyota marketing personnel estimate th...
Accounting (Text Only)
Refer to Table 1.6. a. What is the average miles per gallon for city driving? b. On average, how much higher is...
Statistics for Business & Economics, Revised (MindTap Course List)
If country A is the lowest opportunity cost producer of X and country B is the lowest opportunity cost producer...
Exploring Economics
Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or s...
Fundamentals of Financial Management (MindTap Course List)
Examine the placement of the manager of HR systems in the organization chart of Figure 14.2 (pg. 541) and revie...
Pkg Acc Infor Systems MS VISIO CD
Most economists are _____ that natural resources will eventually limit economic growth. As evidence, they note ...
Principles of Macroeconomics (MindTap Course List)
B. Kelso established Computer Wizards during November of this year. The accountant prepared the following chart...
College Accounting (Book Only): A Career Approach
TRADE DISCOUNT AND CASH DISCOUNTS Merchandise was purchased on account from Grants Distributors on June 12. The...
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Using market supply and demand analysis, explain why labor union leaders are strong advocates of raising the mi...
Economics For Today
Debt and price-earnings ratios Lowe's Companies Inc. (LOW) operates over 1,800 home improvement retail stores a...
Survey of Accounting (Accounting I)
Bank reconciliation The following data were accumulated for use in reconciling the bank account of Creative Des...
Corporate Financial Accounting
Funke Corporation has only five employees who are all paid 1,050 per week. Compute the total FICA taxes that th...
PAYROLL ACCT.,2019 ED.(LL)-TEXT
The price of a given good is likely to be less variable with than without speculators. Explain.
Microeconomics
Does the monetary policy of market monetarists take into account changes in velocity? Explain your answer.
Economics (MindTap Course List)
The owner of a restaurant in Bloomington, Indiana, has recorded sales data for the past 19 years. He has also r...
Practical Management Science
Consider Jack who attends both his sons high school football games and a few professional football games too. A...
Macroeconomics
Provide some examples of spending that would fall under the category of services versus indirect spending. What...
Purchasing and Supply Chain Management
Frieling Company installs granite countertops in customers homes. First, the customer chooses the particular gr...
Cornerstones of Cost Management (Cornerstones Series)
