Mahima Enterprises is considering replacing an old machine by a new machine. Theold machine bought a few years ago has a book value of 90,000 and it can be soldfor 790,000. It has a remaining life of five years after which its net salvage value isexpected to be 710,000. It is being depreciated annually at the rate of 20 percent asper the WDV method.The new machine costs 400,000. It is expected to fetch a net salvage value of25,000 after 5 years. It will be depreciated annually at the rate of 25 percent as perthe WDV method. Investment in working capital will not change with the newmachine. The tax rate for the firm is 35 percent. Estimate the cash flow associatedwith the replacement proposal, assuming that other costs remain unchanged.

Cash flow Associated with new Proposal Sale Proceeds form disposal of old asset…

Enterprises is considering replacing an old r nine bought a few years ago has a book valu 000. It has a remaining life of five years afte I to be 710,000. It is being depreciated annu= VDV method. - machine costs 400,000. It is expected te after 5 years. It will be depreciated annually J method. Investment in working capital - The tax rate for the firm is 35 percent. Est

Enterprises is considering replacing an old r nine bought a few years ago has a book valu 000. It has a remaining life of five years afte I to be 710,000. It is being depreciated annu= VDV method. - machine costs 400,000. It is expected te after 5 years. It will be depreciated annually J method. Investment in working capital - The tax rate for the firm is 35 percent. Est

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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