HCS 385 Problem 10.28
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HCS 385 Problem 10.28
Problem 10.28
The alternative to investing in the new production line is to
overhaul the existing line, which currently has both a book value and a salvage
value of $0. It would cost $ 290,000 to overhaul the existing line, but this
expenditure would extend its useful life to five years. The line would have a
$0 salvage value at the end of five years. The overhaul outlay would be
capitalized and depreciated using MACRS over three years. The tax rate is 35
percent, the opportunity cost of capital is 10 percent. The NPV of the new
production line is $ -184,000 . Should ACME replace or renovate the existing
line? (Round your
intermediate calculations and final answer to the nearest dollar, e.g. 5,275.
Enter negative amounts using either a negative sign preceding the number e.g.
-45 or parentheses e.g. (45).)
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