Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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a) Titiwangsa Corporation is using a computer where its original cost was
RM25,000. The machine is now 5 years old and has a current market value of
RM5,000. The computer is being depreciated over a 10-year life toward zero
salvage value. Depreciation is on straight line basis. Management is
contemplating to purchase a new computer which will cost RM50,000 and the
estimated salvage value is RM1,000. Expected savings from the new computer is
RM3,000 a year. Depreciation is on straight line basis over a seven-year life and
the cost of capital is 10%. If the tax rate is 50%, should the firm replace the
asset?
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Transcribed Image Text:a) Titiwangsa Corporation is using a computer where its original cost was RM25,000. The machine is now 5 years old and has a current market value of RM5,000. The computer is being depreciated over a 10-year life toward zero salvage value. Depreciation is on straight line basis. Management is contemplating to purchase a new computer which will cost RM50,000 and the estimated salvage value is RM1,000. Expected savings from the new computer is RM3,000 a year. Depreciation is on straight line basis over a seven-year life and the cost of capital is 10%. If the tax rate is 50%, should the firm replace the asset?
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