A publishing company wants to replace an old machine, which to date is totally depreciated. The new equipment will incre

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A publishing company wants to replace an old machine, which to date is totally depreciated. The new equipment will increase earnings before depreciation and taxes by $ 33,000 per year over its useful life, calculated at 9 years. Its price is $ 166,500 including installation costs. If the company pays taxes of 47% and its MARR is 11%, establish the convenience of replacement if depreciation is declared through:

a.straight line method

b.Method of the sum of the digits of the years.

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