Attached is questions diagram, USE EXCEL AS ITS REQUIRED Question 10. Using the replacement chain method (machine B can be replaced with an identical machine at the end of year 3), determine which project should be adopted after tax. Pick the correct answer. Machine A Machine B Either machine Neither machine

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Attached is questions diagram, USE EXCEL AS ITS REQUIRED

Question 10. Using the replacement chain method (machine B can be replaced with an identical machine at the end of year 3), determine which project should be adopted after tax. Pick the correct answer.

  1. Machine A

  2. Machine B

  3. Either machine

  4. Neither machine

A firm is trying to choose between two machines to manufacture a new line of office furniture. The financial data for each machine have been compiled as follows:
Machine A
Machine B
Initial investment required
$20,000
$12,000
Service life
б уеars
3 years
Salvage value
$5,000
$3,000
Annual operating expenses
$4,000
$2,500
Annual operating revenue
$15,000
$12,500
Depreciation method
5-year MACRS
5-year MACRS
The firm's marginal tax rate is 40% and uses a 15% discount rate to value the projects. Also, assume that the required service period is indefinite.
Transcribed Image Text:A firm is trying to choose between two machines to manufacture a new line of office furniture. The financial data for each machine have been compiled as follows: Machine A Machine B Initial investment required $20,000 $12,000 Service life б уеars 3 years Salvage value $5,000 $3,000 Annual operating expenses $4,000 $2,500 Annual operating revenue $15,000 $12,500 Depreciation method 5-year MACRS 5-year MACRS The firm's marginal tax rate is 40% and uses a 15% discount rate to value the projects. Also, assume that the required service period is indefinite.
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