Note be sure to consider the depreciation in year 6 c

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Unformatted text preview: efficient pieces of equipment. The existing hoist is 3 years old, cost $32,000, and is being depreciated under MACRS using a 5-year recovery period. Although the existing hoist has only 3 years (years 4, 5, and 6) of depreciation remaining under MACRS, it has a remaining usable life of 5 years. Hoist A, one of the two possible replacement hoists, costs $40,000 to purchase and $8,000 to install. It has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. The other hoist, B, costs $54,000 to purchase and $6,000 to install. It also has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. Increased investments in net working capital will accompany the decision to acquire hoist A or hoist B. Purchase of hoist A would result in a $4,000 increase in net working capital; hoist B would result in a $6,000 increase in net working capital. The projected profits before depreciation and taxes with each alternative hoist and the existing hoist are given in the following table. Profits before depreciation and tax...
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This document was uploaded on 01/19/2014.

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