Answered You can hire a professional tutor to get the answer.
Replacement Problem What if we have an old asset to replace with a new asset?
What if we have an old asset to replace with a new asset?
Original Machine Initial cost = 100,000
Annual depreciation = 9,000
Purchased 5 years ago
Book Value = 55,000
Salvage today = 65,000
Salvage in 5 years = 10,000
New Machine Initial cost = 150,000
Salvage in 5 years = 0
Cost savings = 50,000 per year
3-year MACRS depreciation
Required return = 10%
Tax rate = 40%