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Chapter8question18

Chapter8question18 - 8-18 Residual value 10,000 10,000 Cost...

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8-18 Residual value Cost of new machine 36,000 New 10,000 Cost of capital 10% Current value of existing machine 22,000 Old 10,000 Effective life 4 Cost of old machine - 6 years ago 72,000 Tax rate 30% Depreciation of old machine 7,200 Old New Difference Wages & supervision 18,400 7,500 10,900 Materials, supplies etc 8,000 5,000 3,000 Insurance and general costs 3,600 4,500 -900 30,000 17,000 13,000 0 1 2 3 4 Cost -36,000 Cost savings 13,000 13,000 13,000 13,000 Residual value - old machine 22,000 Residual value - new machine 10,000 Loss of residual value - old machine -10,000 Taxation - -7,800 -1,200 -1,200 -1,200 Net Cash flows -14,000 5,200 11,800 11,800 11,800 PV factor 1.0000 0.9091
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