FIN 300 BuiltriteE capbudprob 5

FIN 300 BuiltriteE capbudprob 5 - 5.,moreefficient...

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5.  Builtrite E is considering replacing one of its machines with a new, more efficient  machine.  The old machine was purchased for $200,000 five years ago and still has an  expected life of five years.  It is being depreciated down to $0.  It has a current salvage  value of $60,000.  The new machine being considered has a cost of $300,000, a five 
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Unformatted text preview: year life, depreciation down to $0. At the end of five years, Builtrite E estimates that they can sell the new machine for $50,000. Also, due to efficiencies, the new machine would generate $90,000 in annual savings (before depreciation and taxes). Assume straight-line depreciation, a marginal tax rate of 34% and a required rate of return of...
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  • Fall '08
  • Olander
  • Finance, new machine

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