A company purchased a large plastic extrusion machine worth US$ 45,000 for a manufacturing process 3 years ago. After 3

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A Company Purchased A Large Plastic Extrusion Machine Worth Us 45 000 For A Manufacturing Process 3 Years Ago After 3 1 (177.22 KiB) Viewed 44 times

1.) Assuming a corporate income tax of 33%, and a before-taxcost of capital of 14%, what is the company's MARR after tax?
Please give your answer in % and rounded off to 2 decimal places(e.g. 1.25% for 0.0125)
2.) Assume instead that the company has a corporate incometax of 33%, capital gains tax of 8%, and an after-tax MARR of11%.
For all questions, round off your final answers to 2 decimalplaces, do not round off your intermediate/middle solutions. Do notinclude currency sign in your answer.
3.) Based on your previous computations, what would yourecommend to the company?
Choices: Replace with Machine X, Keep existing machine, orReplace with Machine Y
A company purchased a large plastic extrusion machine worth US$ 45,000 for a manufacturing process 3 years ago. After 3 years of use, this machine currently has a book value of US$ 22,500. An assessment reveals that the machine can still be used for another 3 more years with annual operating costs of US$ 7,125, annual maintenance costs of 4,550 and no salvage value. This machine is depreciated using straight line depreciation. However, due to rapid technological advancements, better machine alternatives are now available in the market. The company is contemplating replacing the existing machine with a new one. The newer machines will definitely lower the annual operating and maintenance costs. The existing machine will be traded in if a new machine is purchased by the company. The company is looking at two possible replacements, Machine X and Machine Y. Data on these alternatives, and the trade-in values for the existing machine if the company decides to replace it with a new one, are as follows: First Cost (US$) Salvage Value (US$) Useful Life (years) Annual Operating Cost (US$) Annual Maintenance Cost (US$) Depreciation Method Trade-in Value for the Existing Machine (US$) Machine X 75,000 7,500 4 2,500 2,700 SYD 18,500 Machine Y 107,500 11,250 5 3,500 2,200 Straight Line 26,250 Using three years as length of study period for this investment decision, equalize the lives of the three alternatives before answering each of the succeeding questions. Recommend whether the company should keep the old machine or replace it with Machine X or Machine Y. Use Present Worth to solve this problem.