This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: year class. The replacement machine would permit an output expansion, so sale would rise by $1,000 per year; even so, the new machines much greater efficiency would still 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. Tax rate is 40 percent, and its cost of capital is 15 percent. Should it replace the old machine?...
View Full Document
- Spring '10