Table 11.4
Computer Disk Duplicators, Inc. has been considering several capital investment proposals for the year beginning in 2004. For each investment proposal, the relevant cash flows and other relevant financial data are summarized in the table below. In the case of a replacement decision, the total installed cost of the equipment will be partially offset by the sale of existing equipment. The firm is subject to a 40 percent tax rate on ordinary income and on long-term capital gains. The firm's cost of capital is 15 percent.
*Not applicable
-For Proposal 2, the book value of the existing asset is ________. (See Table 11.4)

Question

Table 11.4
Computer Disk Duplicators, Inc. has been considering several capital investment proposals for the year beginning in 2004. For each investment proposal, the relevant cash flows and other relevant financial data are summarized in the table below. In the case of a replacement decision, the total installed cost of the equipment will be partially offset by the sale of existing equipment. The firm is subject to a 40 percent tax rate on ordinary income and on long-term capital gains. The firm's cost of capital is 15 percent.
  *Not applicable
-For Proposal 2, the book value of the existing asset is ________. (See Table 11.4)

Quizplus · Accepted Answer

The book value of the existing asset is $13,600. This is the difference between the original cost of the asset ($34,400) and the accumulated depreciation ($20,800).

Table 11.4 Computer Disk Duplicators, Inc. Has Been Considering Several Capital Investment