Trust Engineering Company is considering the purchase of a new machine to replace an existing one. The
Question:
Trust Engineering Company is considering the purchase of a new machine to replace an existing one. The old machine was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight line basis to a zero salvage value over a 10-year life. The current market value of the old machine is $14,000. The new machine, which costs $30,000, falls into the MACRS 5-year class and has an estimated life of 5 years. The change in depreciation expense that results from accepting the project and will be considered in the capital budgeting analysis is _____. The MACRS rates for 5-year class are Year 1-20%, Year 2-32%, Year 3-19%, Year4-12%, Year 5-11%, Year 6-6%.
(a) $17,000
(b) $44,000
(c) $10,500
(d) $20,000
(e) $23,400
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling