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better purchase?
JJ Ltd. Is evaluating the replacement of an older machine. Existing machine purchased for $32000 and currently book value of 8500. If sold today would be 4500.
The OuOu machine has a price tag of 50000 and expected annual operating costs of 19500. It could do the job for 7 years at which time it could be sold for 6000. The major OuOu is pricier at 69000 but its operating costs are 13000. After 7 years it would be sold for 8000 The existing machine is presently a class 10 asset for CCA purposes wit a 30 % rate. Either of the new machines would join the same asset pool. Firm has tax rate of 44% and cost of capital is 14%. Which new machine would you recommend the firm to purchase? |
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