The Woodruff Corporation purchased a piece of equipment threeyears ago for $230,000. It has an asset...

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The Woodruff Corporation purchased a piece of equipment threeyears ago for $230,000. It has an asset depreciation range(ADR) midpoint of 8 years. The old equipment can be sold for$90,000. A new piece of equipment can be purchased for$320,000. It also has an ADR of 8 years.&nb...

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The Woodruff Corporation purchased a piece of equipment three years ago for $230,000
The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation range (ADR) midpoint of eight years. The old equipment can be sold for $90,000. A new piece of equipment can be purchased for $320.000. It also has an ADR of eight years. Assuming the old and new equipment would provide the following operating gains ( or loss) over the next six years. Year New Equipment Old Equipment 1---------------------------- $80,000---------------------------------- $25,000 2--------------------------- $76,000----------------------------------- $16,000 3-------------------------- $70,000---------------------------------- $9,000 4-------------------------- $60,000----------------------------------- $8,000 5-------------------------- $50,000------------------------------------ $6,000 6--------------------------- $45,000----------------------------------- ($7,000) The firm has a 36% tax rate and a 9% cost of capital. Should the new equipment be purchased to replace the old equipment?

The Woodruff Corporation purchased a piece of equipment threeyears ago for $230,000. It has an asset depreciation range(ADR) midpoint of 8 years. The old equipment can be sold for$90,000. A new piece...

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