ABC Company is considering purchasing manufacturing equipment from two different suppliers. Equipment A has a purchase price of $2.9 million and will cost $80,000, pre tax, to operate on an annual basis. Equipment B, on the other hand, has an initial cost of $5.7 million and costs $69,000, pre-tax, annually. Equipment A will have to be replaced every 8 years and has a salvage value of $340,000, while equipment B has a useful life of 12 years with a salvage value of $420,000. Both equipment sets are in CCA class 9. The tax rate is 35 percent, and the discount rate is 13 percent. Calculate the EAC for each equipment set, and decide which manufacturing equipment to purchase.
Answer to relevant QuestionsVictoria Enterprises Inc. is evaluating alternative uses for a three-storey manufacturing and warehousing building that it has purchased for $1,450,000. The company could continue to rent the building to the present ...Lockhart Homebuilders is evaluating a project that costs $724,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at ...You are the financial analyst for a tennis racquet manufacturer. The company is considering using a graphite-like material in its tennis racquets. The company has estimated the information in the following table about the ...Suppose the returns on bonds and T-bills are normally distributed. Based on the historical record, use the NORMDIST function in Microsoft Excel to answer the following questions: a. What is the probability that in any given ...Asset W has an expected return of 12.3 percent and a beta of 1.3. If the risk-free rate is 4 percent, complete the following table for portfolios of asset W and a risk-free asset. Illustrate the relationship between ...
Post your question