Should the company replace an old machine based on this information? Accurately calculate the Net Present Value (NPV) to make a recommendation. Year Savings Before Depreciation and Tax Incremental Depreciation Earnings Before Tax Tax at 25% Earnings After Tax Adjustment to Add Back Depreciation 0 1 $ 42,000 $ $ (12,960) $ 2 42,000 $ (43,800) $ 3 42,000 $ (20,760) $ 4 5 6 Notes Tax Rate Discount Rate 42,000 $ (13,740) $ 42,000 $ (20,700) $ 42,000 (10,440) 25.00% 10% Cost of New Machine $ (180,000) Proceeds from Sale of Old Machine $ 37,600 Tax Benefit From Sale $ 5,000 Annual Cash Flows Cash Flows Discounted at 10% Net Present Value Change Sign Change Sign
Should the company replace an old machine based on this information? Accurately calculate the Net Present Value (NPV) to make a recommendation. Year Savings Before Depreciation and Tax Incremental Depreciation Earnings Before Tax Tax at 25% Earnings After Tax Adjustment to Add Back Depreciation 0 1 $ 42,000 $ $ (12,960) $ 2 42,000 $ (43,800) $ 3 42,000 $ (20,760) $ 4 5 6 Notes Tax Rate Discount Rate 42,000 $ (13,740) $ 42,000 $ (20,700) $ 42,000 (10,440) 25.00% 10% Cost of New Machine $ (180,000) Proceeds from Sale of Old Machine $ 37,600 Tax Benefit From Sale $ 5,000 Annual Cash Flows Cash Flows Discounted at 10% Net Present Value Change Sign Change Sign
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...
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