Question

An asset purchased four years ago for $35,000 can be replaced by a new type of equipment. The market value of the old machine is currently $15,000 and will be $10,000, $8,000, $6,000, $2,000, and $0 at the end of each of the next five years. The annual operating costs (AOC) for each of the next five years will be $3,000, $3,200, $3,500, $4,000, and $5,000. How much longer should the defender be kept, if the MARR is 10%?

Answer #1

A current asset (defender) is being evaluated for potential
replacement. It was purchased four years ago at a cost of $61,000.
It has been depreciated as a MACRS (GDS) five-year property-class
asset. The corresponding depreciation rates are: 20%, 32%,
19.2%, 11.52%, 11.52% and 5.76%. The present MV of the defender
is $15,000. Its remaining useful life is estimated to be four
years, but it will require additional repair work now (a one-time
$3,800 expense) to provide continuing service equivalent to...

Jubail Corporation has just purchased a new CAD Machine for
$35,000 to replace old machine that had a salvage value of $
15,000. The useful life of the new machine is 10 years. The machine
generates annual sales of $10,000 and has annual maintenance cost
of $5,000. Calculate the Payback period using Discounted Payback
method, If Jubail's MARR (minimum acceptable rate of return) is
15%:
A. 8.12 Years
B. 6.57 Years
C. 8.57 Years
D. 11.05 Years

A machine was bought 4 years ago for $20,000. SL depreciation
has been used with B=$20,000, N=5years, S=$0. A replacement is been
considered. A new machine can be bought for $10,000 to replace the
old one. 100% bonus depreciation will be used for the new machine
with B=$10,000, N=2 years, S=$0. The new machine will be used for 2
years and then can be sold for $4,000. The new machine will save
$6,000/yr in operation cost. The old machine can...

A company is thinking in replacing an existing machine. The old
machine it is expected to last for another four (4) years and has a
market value of $3,000. Operating estimated costs are $2,000 each
year. The new machine or challenger has a cost of $15,000,
operating cost of $1,000 and an expected life of 10 years. The
salvage value of the new machine is $5,000. Should be replaced,
with an interest rate of 10%?
a. Replace, the defender is...

"An existing asset that cost $18,000 two years ago has a market
value of $11,000 today, an expected salvage value of $1,900 at the
end of its remaining useful life of six more years, and annual
operating costs of $4,000. A new asset under consideration as a
replacement has an initial cost of $19,100, an expected salvage
value of $3,200 at the end of its economic life of three years, and
annual operating costs of $2,200. It is assumed that...

Replacement Analysis BTCF
Machine A was purchased three years ago for $12,000 and had an
estimated market value
of $1,000 at the end of its 10-year life. Annual operating costs
are $1,500. The machine will perform satisfactorily for the next
seven years. A salesman for another company is offering machine B
for $60,000 with a market value of $5,000 after 10 years. Annual
operating costs will be $800. Machine A could be sold now for
$8,000, and the MARR is...

Replacement Analysis BTCF Machine A was purchased three years
ago for $12,000 and had an estimated market value of $1,000 at the
end of its 10-year life. Annual operating costs are $1,500. The
machine will perform satisfactorily for the next seven years. A
salesman for another company is offering machine B for $60,000 with
a market value of $5,000 after 10 years. Annual operating costs
will be $800. Machine A could be sold now for $8,000, and the MARR
is...

"You plan to operate the same type of machine for 12 years.
Machine A lasts 4 years and Machine B lasts 6 years. Machine A
costs $8,000 and Machine B costs $12,000. The salvage value of
Machine A is $4,000 and the salvage value of Machine B is $2,000.
Annual operation and maintenance costs are $3,000 for Machine A and
$3,500 for Machine B. Both machines can be purchased in the future
at the same price as today, and their...

Buckley, an individual, began business two years ago and has
never sold a §1231 asset. Buckley has owned each of the assets
since he began the business. In the current year, Buckley sold the
following business assets: Asset Accumulated Original Cost
Depreciation Gain/Loss Computers $ 6,000 $ 2,000 $ (3,000)
Machinery 10,000 4,000 (2,000) Furniture 20,000 12,000 7,000
Building 100,000 10,000 (1,000) Assuming Buckley’s marginal
ordinary income tax rate is 32 percent, answer the questions for
the following alternative scenarios:...

A m/c was bought 4 years ago for $20,000. SL depreciation has
been used with B=$20,000, N=5years, S=$0. A replacement is been
considered. A new m/c can be bought for $10,000 to replace the old
one. 100% bonus depreciation will be used for the new m/c with
B=$10,000, N=2 years, S=$0. The new m/c will be used for 2 years
and then can be sold for $4,000. The new m/c will save $6,000/yr in
operation cost. The old m/c can...

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