5. What information should be considered when evaluating the replacement of an old asset by a new asset?
Information to be considered when evaluating the replacement of an old asset by a new asset
5. What information should be considered when evaluating the replacement of an old asset by a...
What is the purpose of marginal analysis when exploring replacement of an asset? Question 18 options: To determine the length of time the challenger asset should be used once adopted. To estimate the cost of capital for the new asset To determine if the defender asset should be used beyond its ESL. To determine what the most appropriate tax rate for the project should be
When evaluating alternatives, what type of costs should be considered? A. Relevant costs B. Sunk costs C. Prevention costs D. Fixed costs
Clinton Truck Corp. is evaluating whether it should replace a 10-year old equipment. Because this is a replacement type of project, you set out to estimate relevant cash flows assuming the replacement decision is made. What cash flows do you think are valid and relevant in the initial period, i.e. period 0? I. Purchase cost of a new machine alone II. Sales price of the old machine alone III. Potential cost savings from using the new machine IV. After-tax salvage...
Solve not in Excel and provide all the formulas. The company is evaluating if the replacement of an old machine is economically feasible. You have the following information: New machine: purchase price is $8 million, economic life 10 years, annual EBITDA is $4.4 million, book value in 5 years is 0, while market value is 0.8 million. Old machine: book value today is $4 million while market value $2.8 million, remaining economic life is 10 years, annual EBITDA is $2.5...
Exercise 6-17A Asset replacement-opportunity cost LO 6-5 Walton Freight Company owns a truck that cost $32,000. Currently, the truck's book value is $26,000, and its expected remaining useful life is four years. Walton has the opportunity to purchase for $28,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,500 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being...
When deciding to buy a new computer, all of the following should be considered except for the A.warranty on the new computer. B.games that come with the new computer. C.cost of the old computer. D.cost of the new computer.
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 $27,000 to $56,000 per year. The new machine will cost $85,000, 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...
What factors should concentrate on when evaluating a pretesting screening?
Keep the Highest: 0/2 Attempts: 0 4. Problem 12.11 Click here to read the eBook: Replacement Analysis 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 $30,000 to $52,000 per year The new machine will cost $82,500, 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,...
REPLACEMENT ANALYSIS The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $550,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $235,000. The old machine is being depreciated by $110,000 per...