Five years ago a company in new jersey installed a


Five years? ago, a company in New Jersey installed a? diesel-electric unit costing $55,000 at a remote site because no dependable electric power was available from a public utility. The company has computed depreciation by the? straight-line method with a useful life of 10 years and a zero salvage value. Annual operation and maintenance expenses are ?$15,000?, and property taxes and insurance cost another $3,300 per year. Dependable electric service is now available at an estimated annual cost of ?$35,000. The company in New Jersey wishes to know whether it would be more economical to dispose of the? diesel-electric unit? now, when it can be sold for ?$45,000?, or to wait five years when the unit would have to be replaced anyway? (with no? MV). The company has an effective income tax rate of 40?% and tries to limit its capital expenditures to opportunities that will earn at least 10?% per year after income taxes. What would you?r ecommend? (Find the AW value for the defender and the challenger)

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Five years ago a company in new jersey installed a
Reference No:- TGS02154039

Expected delivery within 24 Hours