iSooky has a spotter truck with a book value of $59,000 and a remaining useful life of 5 years. At the end of the five years the spotter truck will have a zero salvage value. The market value of the spotter truck is currently $41,500. iSooky can purchase a new spotter truck for $139,000 and receive $32,900 in return for trading in its old spotter truck. The new spotter truck will reduce variable manufacturing costs by $26,900 per year over the five- year life of the new spotter truck. The total increase or decrease in income by replacing the current spotter truck with the new truck (ignoring the time value of money) is: Multiple Choice O $28,400 decrease $32,900 decrease $139,000 decrease $32.900 increase $28,400 increase

iSooky has a spotter truck with a book value of $59,000 and a remaining useful life of 5 years. At the end of the five years the spotter truck will have a zero salvage value. The market value of the spotter truck is currently $41,500. iSooky can purchase a new spotter truck for $139,000 and receive $32,900 in return for trading in its old spotter truck. The new spotter truck will reduce variable manufacturing costs by $26,900 per year over the five- year life of the new spotter truck. The total increase or decrease in income by replacing the current spotter truck with the new truck (ignoring the time value of money) is: Multiple Choice O $28,400 decrease $32,900 decrease $139,000 decrease $32.900 increase $28,400 increase

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Sooky has a spotter truck with a book value of $46,000 and a remaining useful life of five years. At the end of the five years the spotter truck will have a zero-salvage value. iSooky can purchase a new spotter truck for $126,000 and receive $31,600 in return for trading in its old spotter truck. The old spotter truck has variable manufacturing costs of $81,000 per year. The new spotter truck will reduce variable manufacturing costs by $25,600 per year over the five-year life of the new spotter truck. The total increase or decrease in income by replacing the current spotter truck with the new truck is:
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