ABC Corp is considering an asset replacement decision. The existing machine: was bought 2 years ago...

  

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ABC Corp is considering an asset replacement decision. The existing machine: was bought 2 years ago for $60,000 economic life was 5 years when it was bought tax allowable depreciation is $12,000 p.a. for 5 years . current market value of machine = $40,000 expected salvage value of machine in 3 years time is $4,000 The new machine: . . would cost $80,000 (including purchase cost, shipping cost and installation cost) economic life is 3 years tax allowable depreciation is $27,000 p.a. for 2 years . expected salvage value in 3 years time is $5,000 . Deciding to buy the new machine will: use the working capital of $5,000 Additional details: Before tax net operating cashflow old machine: $112,000 p.a. for 3 years new machine: $123,500 p.a. for 3 years Corporate tax rate = 30% Assumed discount rate = 7% p.a. Based on the assumed discount rate, what is the value of using the new machine to replace the old machine? ABC Corp is considering an asset replacement decision. The existing machine: was bought 2 years ago for $60,000 economic life was 5 years when it was bought tax allowable depreciation is $12,000 p.a. for 5 years . current market value of machine = $40,000 expected salvage value of machine in 3 years time is $4,000 The new machine: . . would cost $80,000 (including purchase cost, shipping cost and installation cost) economic life is 3 years tax allowable depreciation is $27,000 p.a. for 2 years . expected salvage value in 3 years time is $5,000 . Deciding to buy the new machine will: use the working capital of $5,000 Additional details: Before tax net operating cashflow old machine: $112,000 p.a. for 3 years new machine: $123,500 p.a. for 3 years Corporate tax rate = 30% Assumed discount rate = 7% p.a. Based on the assumed discount rate, what is the value of using the new machine to replace the old machine?