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  3. the company had an old machine: the cost $200,000

The company had an old machine: The cost $200,000 the life 10 years ...

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Finance

The company had an old machine:
The cost $200,000 the life 10 years the residual (salvage) value $20,000
The annual depreciation =
After five years, the book value of the machine = cost accumulated depreciation
=
The market value (fair value or sale value)= $130,000
The tax rate =20% for the capital gain
The capital gain = market value book value =
The tax =
The cost of the new machine $300,000
The life 5 years
The salvage 20,000
The annual depreciation for the new machine =
The tax saving from the increase in depreciation:
The increase of annual depreciation =
The increase in income because of using the new machine =
The discount rate 10%
The investment cost = the cost of new machine (sales value of old machine tax for capital gain)
=
The annual tax =(new income increase in depreciation)*20%
=
The NPV is .............., so we advise to .................. the machine.

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