It is desired to determine the present economic value of an old machine by considering how it compares with the best mod
Posted: Wed Apr 27, 2022 11:40 am
It is desired to determine the present economic value of an old
machine by considering how it compares with the best modern machine
that could replace it. The old machine is expected to require
out-of-pocket costs of ₱85,000 each year for 4 years and then be
scrapped for ₱5,000 residual value. The new machine requires an
investment of ₱40,000 and would have out-of- pocket costs of
₱79,000 a year for 8 years and then zero salvage value. Invested
capital should earn a minimum return of 15% before taxes.
Determine the present value of the old machine using ROR on
additional investment and AWM.
machine by considering how it compares with the best modern machine
that could replace it. The old machine is expected to require
out-of-pocket costs of ₱85,000 each year for 4 years and then be
scrapped for ₱5,000 residual value. The new machine requires an
investment of ₱40,000 and would have out-of- pocket costs of
₱79,000 a year for 8 years and then zero salvage value. Invested
capital should earn a minimum return of 15% before taxes.
Determine the present value of the old machine using ROR on
additional investment and AWM.