Altoona Company is considering replacing a machine with a book value of P200,000, a remaining useful life of 4 years, and annual straight-line depreciation of P50,000. The existing machine has a current market value of P175,000. The replacement machine would cost P320,000, have a 4 year life, and save P100,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the increase in income after taxes if the company replaces the machine?
Altoona Company is considering replacing a machine with a book value of P200,000, a remaining useful life of 4 years, and annual straight-line depreciation of P50,000. The existing machine has a current market value of P175,000. The replacement machine would cost P320,000, have a 4 year life, and save P100,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the increase in income after taxes if the company replaces the machine?
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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1. Altoona Company is considering replacing a machine with a book value of P200,000, a remaining useful life of 4 years, and annual straight-line depreciation of P50,000. The existing machine has a current market value of P175,000. The replacement machine would cost P320,000, have a 4 year life, and save P100,000 per year in cash operating costs. If the replacement machine would be depreciated using the straight-line method and the tax rate is 40%, what would be the increase in income after taxes if the company replaces the machine?
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