Please help solving

637 views 1 replies

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $450,000; the new one will cost $580,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $130,000 after five years. The old computer is being depreciated at a rate of $90,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $230,000; in two years it will probably be worth $60,000. The new machine will save us $85,000 per year in operating costs. The tax rate is 38 percent, and the discount rate is 14 percent. What is the NPV of the decision to replace the computer now?

Replies (1)

This question is important for Final Nov'14.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 27 May 2026
CA Article Trainee

Rahul Dang & Associates-Chartered Accountants

Pune

CA Inter

View Details
Company
ARTICLESHIP 28 May 2026
Accounts, Audit & Compliance Executive

Shyam Joshi & Associates

Pune

B.Com

View Details
Company
Featured 26 May 2026
Account Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
09 June 2026
Accounts Associate

S Madan and CO

New Delhi

Graduate (Any)

View Details
Company
Featured 27 May 2026
Lead Conversion Executive / Sales Closing Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
23 May 2026
Account Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
Featured 28 May 2026
SEMI QUALIFIED/ CA DROPOUTS/ ARTICLES

T R SOOD & CO

New Delhi

CA Inter

View Details
Company
16 June 2026
Sr. Associate / Assistant Manager | TAS / FDD

Boutique Investment Bank & Transaction Advisory Firm

Gurgaon

CA

View Details