Manufacturing Division has recommended the purchase of a new model of equipment to save operating costs. Relevant
Question:
Manufacturing Division has recommended the purchase of a new model of equipment to save operating costs. Relevant information is shown below:
Equipment cost....................................................................................................$ 70,000
Salvage value of project equipment at the end of the fifth year......................20,000
Estimated annual cash savings from the new machine....................................10,500
Life............................................................................................................................5 years
Annual depreciation (straight line)........................................................................10,000
Average tax rate...........................................................................................................30%
Required:
What is the payback period?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Please see the note below before assigning this problem to students Net income before tax and depreciation 10500 Less Depreciation expense 10000 Net i...View the full answer
Introduction to Managerial Accounting
ISBN: 978-1259105708
5th Canadian edition
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
