Novartis International AG is considering replacing one labeling system with a new model. The old system was
Question:
Novartis International AG is considering replacing one labeling system with a new model. The old system was purchased 2 years ago for an installed cost of CHf 500,000. The firm is depreciating the labeling system using a straight line amortization schedule for 5 years. The new machine costs CHf 700,000 and requires CHf 50,000 in installation costs. The firm is subject to a tax of 24%, including the cantonal tax rates. In each of the following cases, calculate the initial investment for the replacement.
a. Novartis sells the old labeling system for CHf 400,000.
b. Novartis sells the old labeling system for CHf 300,000.
c. Novartis sells the old labeling system for CHf 200,000.
d. Novartis sells the old labeling system for CHf 100,000.
Step by Step Answer:
Principles Of Managerial Finance Brief
ISBN: 9781292267142
8th Global Edition
Authors: Chad J. Zutter, Scott B. Smart