The Rumpel Felt Company purchased a felt press last year at a cost of $15,000. The division manager reports that for $13,000 (including installation), a new felt press can be bought. Both machines are in Class 43 with a 30% depreciation rate. The old machine's current market value is $12,000. The new press will be used for two years and then sold for $3,500. If the old press is not replaced, then it could be sold for $3,000 in two years. What is the present value of incremental tax shields in the terminal year? The tax rate is 40% and Rumpel's cost of capital is 10%. O $1,143 O $236 $29 O $600

The Rumpel Felt Company purchased a felt press last year at a cost of $15,000. The division manager reports that for $13,000 (including installation), a new felt press can be bought. Both machines are in Class 43 with a 30% depreciation rate. The old machine's current market value is $12,000. The new press will be used for two years and then sold for $3,500. If the old press is not replaced, then it could be sold for $3,000 in two years. What is the present value of incremental tax shields in the terminal year? The tax rate is 40% and Rumpel's cost of capital is 10%. O $1,143 O $236 $29 O $600

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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