Question: Galveston Shipyards is considering the replacement of an eight year old riveting
Galveston Shipyards is considering the replacement of an eight-year-old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $54,000 per year. The new machine will cost $82,500, and it will have an estimated life of eight years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period. The firm’s marginal tax rate is 40 percent, and the firm’s required rate of return is 12 percent. The old machine has been fully depreciated and has no salvage value. Should the old riveting machine be replaced by the new one?
Answer to relevant QuestionsExit Corporation is evaluating a capital budgeting project that costs $320,000 and will generate $67,910 for the next seven years. If Exit’s required rate of return is 12 percent, should the project be purchased?Project P costs $15,000 and is expected to produce benefits (cash flows) of $4,500 per year for five years. Project Q costs $37,500 and is expected to produce cash flows of $11,100 per year for five years.a. Calculate the ...A college intern working at Anderson Paints evaluated potential investments using the firm’s average required rate of return (r), and he produced the following report for the capital budgeting manager:The capital ...Goodtread Rubber Company has two divisions: the tire division, which manufactures tires for new autos, and the recap division, which manufactures recapping materials that are sold to independent tire recapping shops ...Use the computerized model in File C13 to work this problem. Golden State Bakers, Inc. (GSB) has an opportunity to invest in a new dough machine. GSB needs more productive capacity, so the new machine will not replace an ...
Post your question