FINANCE-Otter must decide whether to replace a 10 year-old packing machine

Otter must decide whether to replace a 10 year-old packing machine with a new one that costs$153,800. Replacing the old machine will increase net operating income(excluding depreciation) from$70,000 to $110,000 and it will decrease net working capital by $18,000. The new machine falls into MACRS 5-year class. If the new machine is purchased, it will be sold in 6 years for $25,000, whereas, if the old machine is kept, it will have no salvage value in 6 years. The old machine has a current market value of $10,860 and although its current book value is $8,000, in one year the old machine’s book value will be zero ($0). The firm’s marginal tax rate is 40% and its required rate of return is 12%. Should the new packing machine be purchased? Explain. Depreciation NEW OLDYear 1 -$22,760 $ 8,000Year 2 – $49,216 $ 0Year 3 – $29,222 $ 0Year 4 – $18,456 $ 0Year 5 – $ 16,918 $ 0Year 6 – $9,228 $ 0Is there a way to make a balance sheet to solve this? I was looking at examples and that seems to be what they are looking for?

 

CLICK HERE TO ORDER A SIMILAR PAPER

We pride ourselves in writing quality essays

CLICK HERE TO CONTACT US

Lets Start Working

Plagiarism Free

We use anti-plagiarism software to ensure you get high-quality, unique papers. Besides, our writers have a zero plagiarism mentality

On Time Delivery

Your essay will be delivered strictly within the deadline.  If you have an urgent order, we can do it!

Money Back Guarantee

We offer warranty service, including free revisions, and a right to request a refund incase your expectations are not met!

THE BEST PAPER WRITER HELPER

Our Advantage

  • Say “NO” to plagiarism – FREE plagiarism report as an addition to your paper
  • The lowest prices that fit excellent quality
  • Authorship – you are the one who possesses the paper. We DO NOT re-sale or re-use any of them.

OUR PAPER WRITER HELPER GOODIES

Our Freebies

  • Free Cover Page
  • Free Revisions
  • Free Reference Page
  • Free 24/7 support

Pin It on Pinterest

Share This