Question: You are evaluating two different devices. Equipment A costs $ 2 1 5 , 0 0 0 and is used for a period of three

You are evaluating two different devices. Equipment A costs $215,000 and is used for a period of three years, with a pre-tax operating cost of $32,000 per year. Equipment B costs $355,000 and is used for six years, with a pre-tax operating cost of $42,000 per year. Both units were depreciated to book value of 0 over the life of the unit using the linear old method of depreciation, assuming a residual value of $20,000. If your tax rate is 35%, the discount rate is 9%. Calculate the average cost of the two machines for the year. Which machine do you prefer?Why?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Q:

1- Suppose you sell a fixed asset for $90,000 when its book value is $95,000. If your company's marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be...

Q:

i just need help answering the questions in the word document Major Assignment This assignment is related to the following CLRS: 1, 7, 9, 10, 11 Skinny Joe's Caf This assignment is out of 100 points...

Q:

70 tea female 2 good 12 2000 71 tea female 4 excellent 20 1200 72 espresso male 2 good 10 0 73 frappuccino female 23 2 good 12 1000 74 tea female 25 3 good 20 1650 75 frappuccino female 21 2...

Q:

1. Alborz Ltd. Jus paid a dividend of $4 per share, these dividendsare expected to grow at the rate of 5% p.a., for the following 3 years. After that the growth rate in dividends will be 2% per year...

Q:

Group Project Project Topic A study on students' drinking behavior at Langara College. The objectives of the project Univariate Objectives . To nd out how much money is spent weekly on Starbucks...

Q:

Please create an excel spreadsheet with formulas for requirement 5 (pages 24-27)and requirement 6 (pages 28-31)only. Please submit in excel format. Both questions and answers are provided for...

Q:

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

Q:

can i get a solution to this question please. Value: Document (include your file name) 15% of final grade How to complete: 1. Read the following Anniversary Party scheduling problem: As the project...

Q:

Consider the project contained in Problem 7 in Chapter 11 (California Health Center). a. Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per day,...

Q:

CHAPTER 11 UHFM 7TH EDITION PROBLEM 7: I need help with problem seven and three from the attached file please California Health Center, a for-profit hospital, is evaluating the purchase of new...

Q:

The financial statements of The Hershey Company and Tootsie Roll are presented below. 1) FIND PROFIT MARGIN FOR 2011 FOR HERSEY AND TOOTSIE ROLL 2)GROSS PROFIT FOR 2011 FOR HERSEY AND TOOTSIE ROLL (...

Q:

One subunit of Pacific Sports Manufacturing Company had the following financial results last month: Requirements 1. Complete the performance evaluation report for this subunit (round to four...

Q:

With regard to correspondent banking relationships, a bank must know _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ of their correspondent banks. Choose all that apply: I. the management II . the...

Q:

Audit standards require that auditors use analytical procedures at two stages in the audit: at the planning, or risk assessment, level and at the final, or concluding, stages of the audit. In...

Q:

A satellite is launched to orbit the Earth at an altitude of 3.20 10 7 m for use in the Global Positioning System (GPS). Take the mass of the Earth to be 5.97 10 24 kg and its radius 6.38 10 6 m....

Q:

Marilyn terrill is the senior auditor for the audit of uden supply company for the year ended december 31, 20x4. in planning the audit, marilyn is attempting to develop expectations for planning...

Q:

Fill in the blank. t. L ea"f(t) dr F(s - a) whereas Leat f(t) dr F(s - a)

Q:

On January 1, Year 5, Pic Company acquired 7,500 ordinary shares of Sic Company for $937,500. On January 1, Year 6, Pic Company acquired an additional 2,000 ordinary shares of Sic Company for...

Q:

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

Q:

(Change in EstimateDepreciation) Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time....

Q:

(Error and Change in EstimateDepreciation) Joy Cunningham Co. purchased a machine on January 1, 2005, for $550,000. At that time it was estimated that the machine would have a 10-year life and no...

Q:

(Accounting for Accounting Changes and Errors) Listed below are various types of accounting changes and errors. 1. Change in a plant assets salvage value. 2. Change due to overstatement of inventory....