Unformatted text preview: The old machine has a $105,000 market value if sold today, a $30,000 book value, and is being depreciated straight line to a zero book value over the next three years. If Tremonton Toys doesn’t expand into Europe, their old machine will do an adequate job for 5 more years and then could be sold for $17,500. The new, higher-capacity machine will cost $1,013,500. Additionally, Tremonton Toys will pay a sales tax of 8.5% and delivery and installation fee of $66,500. The new machine will be depreciated on a straight-line basis over 5 years to its estimated salvage value of $80,000. If sales increase, Tremonton Toys will need to invest $88,000 in working capital which will be fully recovered at the end of the 5 year project. Tremonton Toys has a 17% cost of capital and a corporate tax rate of 34%....
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This note was uploaded on 01/04/2012 for the course BUSM 201 taught by Professor Jennlarson during the Fall '11 term at BYU.
- Fall '11