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Unformatted text preview: 90,000.
The renewed machine would have a 5-year usable life and would be depreciated
under MACRS using a 5-year recovery period. Renewing the machine would
result in the following projected revenues and expenses (excluding depreciation): Year Revenue Expenses
(excl. depreciation) 1 $1,000,000 $801,500 2 1,175,000 884,200 3 1,300,000 918,100 4 1,425,000 943,100 5 1,550,000 968,100 The renewed machine would result in an increased investment in net working
capital of $15,000. At the end of 5 years, the machine could be sold to net
$8,000 before taxes.
Alternative 2 Replace the existing machine with a new machine that costs
$100,000 and requires installation costs of $10,000. The new machine would
have a 5-year usable life and would be depreciated under MACRS using a 5- 392 PART 3 Long-Term Investment Decisions year recovery period. The firm’s projected revenues and expenses (excluding
depreciation), if it acquires the machine, would be as follows: Year Revenue Expenses
(excl. depreciation) 1 $1,000,000 $7...
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This document was uploaded on 01/19/2014.
- Fall '13