8) 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=5 years, S=$0. The new m/c will be used for 2 years and then can be sold for $5,000. The new m/c will save $6,000/yr in operation cost. The old m/c can be sold for $5,000 right now, or kept in use for 2 more years and then will be sold for $2,000. Incremental combined tax rate is 50%, after-tax MARR is 10%. Calculate APW of the replacement.
8) 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=5 years, S=$0. The new m/c will be used for 2 years and then can be sold for $5,000. The new m/c will save $6,000/yr in operation cost. The old m/c can be sold for $5,000 right now, or kept in use for 2 more years and then will be sold for $2,000. Incremental combined tax rate is 50%, after-tax MARR is 10%. Calculate APW of the replacement.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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don't use excel also can you show me maths solving with equation by hand please....
Transcribed Image Text:8) 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=5 years, S=$0. The new m/c will be used for 2
years and then can be sold for $5,000. The new m/c will save $6,000/yr in
operation cost. The old m/c can be sold for $5,000 right now, or kept in use for 2
more years and then will be sold for $2,000. Incremental combined tax rate is
50%, after-tax MARR is 10%. Calculate APW of the replacement.
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