When determining the best time to replace an existing asset, for what reason would you need to use marginal analysis? a. To determine what the most appropriate tax rate for the project should be b. To estimate the cost of capital for the new asset c. To determine if the defender asset should be used beyond its ESL. d. To determine the length of time the challenger asset should be used once it is placed into service.

Determine the period necessary to recover both the capital investment and the cost of funds required to support the investment for a project?

After a project has been accepted, the decision to lease or buy is determined by the present value of the lease's cash flows when discounted at the project's risk-adjusted cost of capital. O True O False

P7.2 (LO 2, 3), AN As a supervisor in Wealth Health Services, you oversee the investment activity of a number of clients as well as train interns and new staff in the company. Cole, a college junior, is in just the second week of his 12-week internship. He is helping a client evaluate an asset replacement decision while following a similar example from a different client. He presents the asset replacement information, along with his analysis to you, as follows. Original cost of existing asset Market value of existing asset today Book value of existing asset today $ 80,000 $ 5,000 $ 5,000 New replacement asset cost $150,000 New replacement asset useful life (years) Estimated salvage value of new replacement asset at end of useful life Estimated additional operating cash inflows from new replacement asset 10 $ 5,000 $ 25,000 Minimum required return 10% Effective tax rate 28% Cole's Analysis Proceeds from sale of existing asset Cost of new replacement asset $ 5,000 $ (150,000) Present…