$2/31/2025$

$3$

Question $9$

A company has an old machine that was purchased $5$ years ago. Other information about the old machinery is as follows:

Initial cost $=$$$150,000$

CCA rate $=25\%$

Salvage today $=$$$67,000$

Salvage in $5$ years $=$$$5,500$

Now, this company' officer is considering the purchase of new machinery. Information about new machine is as follows:

$-$Initial cost $=$$$250,000$ and $5-$year life

$-$Salvage in $5$ years $=0$

Cost savings $=75,000$ per year

$-$CCA rate $=25\%$

$-$Required return $=12\%$

Tax rate $=35\%$

Should, the company's officer make the purchase?

$3/31/2005$