Ask Experts Questions for FREE Help !
Ask
    dublindenise's Avatar
    dublindenise Posts: 1, Reputation: 1
    New Member
     
    #1

    Oct 18, 2009, 11:10 AM
    Capital Budgeting Decision
    Kaufman Chemical is evaluating the purchase of a new multi-stage centrifugal compressor for its
    wastewater treatment operation that costs $750,000 and requires $57,000 to install. This outlay would be
    partially offset by the sale of an existing compressor originally purchased five years ago for $490,000. It
    is being depreciated using a five-year recovery schedule under ACRS and can currently be sold for
    $150,000. The existing compressor’s maintenance costs are increasing, and the new compressor could
    reduce operating costs before depreciation and taxes by $280,000 annually for the next five years. The
    new equipment will be depreciated under a five-year recovery schedule using ACRS. The firm has an
    18% cost of capital and a 40% tax of ordinary and capital gain income.
    Evaluate whether Kaufman Chemical should replace its existing wastewater treatment equipment with the
    new compressor. (Do not consider the terminal value of the new compressor in your analysis.)
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
     
    #2

    Oct 18, 2009, 03:41 PM

    Please see the guidelines for posting homework problems:
    Ask Me Help Desk - Announcements in Forum : Homework Help

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Capital Budgeting. Cost of Capital. Cash Flow NPV [ 1 Answers ]

Hi there, This is really URGENT!! NEEDED BY THURSDAY NOON I tried to do this myself but just couldn’t find where to start. Any help would be very much appreciated. CAPITAL BUDGETING TECHNIQUES. This question is based on a case study in Fundamentals of corporate finance 4ed. Ross,...

Capital Budgeting and opportunity cost of capital [ 1 Answers ]

Wiley Co. is considering an investment of $200,000 in a project with a 5 year economic life. After tax net income from the project has been calculated at $22,00 per year including a deduction for depreciation of $30,000 per year. The residual or salvage value at the end of 5 years is $50,000....


View more questions Search