Our company must replace an obsolete machine press. We have two bids, summarized below, to consider. Machine
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Our company must replace an obsolete machine press. We have two bids, summarized below, to consider. Machine A is depreciated using MACRS. Machine B is depreciated using SOYD. Machine A will be sold for $5000 at the end of its useful life and machine B will be sold for $10,000 at the end of its useful life. Our company uses an after-tax MARR of 12% and it falls in the 38% total income tax bracket. Our company is required to purchase one of these two machines, do nothing is not an option.
| Machine A | Machine B | |
|---|---|---|
| Useful Life (years) | 5 | 5 |
| Initital Cost | $ 75,00 | $ 76,000 |
| Annual O & M | $ 62,000 | $ 70,000 |
| Annual Revenue | $ 82,000 | $ 85,000 |
| Salvage Value | 0 | $ 5,000 |
Based on the After Tax Cash Flow and using a Net Present Worth analysis and considering taxes which machine should our company purchase?
Expert Answer:
Related Book For 
Managerial Decision Modeling with Spreadsheets
ISBN: 978-0136115830
3rd edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
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