Arnold Company is acquiring a new machine with a life of 5 years
for use on its production line. The following data relate to this
purchase:
The new machine would replace an old fully-amortized machine. The
old machine can be sold for $15,000 at the time the new equipment
is acquired. The income tax rate is 30%, and the discount rate is
12%. Arnold uses the straight-line method for amortization on all
machines (ignore the half-year convention). Note: some amounts are
rounded.
What is the present value of the terminal value (after tax)? Round
to the nearest dollar.
Solution:
Present value of terminal value = $8,000 * PV factor at 12% for 5th period
= $8,000 * 0.56743
= $4,539
Arnold Company is acquiring a new machine with a life of 5 years for use on...
Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Testbank Question 51 Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: Cost of new machine Annual cost savings in cash expenses Terminal value Maintenance required in the 4th year Book value of the old machine $100,000...
Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: The new machine would replace an old fully-amortized machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for amortization on all machines (ignore the half-year convention). Note: some amounts...
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