Lincoln electric is considering buying a new welder


Lincoln Electric is considering buying a new welder manufacturing line to replace the existing manufacturing line. The new line will cost $750,000 to purchase and $45,000 to install. It will have operating expenses of $87,000 per year and have a final Market Value of $160,000 at the end of its 22-year economic life. The equipment will be depreciated by a straight-line method. It is planned that a welder manufacturing line will be needed indefinitely. The existing line was bought 12 years ago at a capital investment cost of $650,000. It currently has a Market Value of $86,000. If this line is kept, it will have an economic life of 3 years, operating expenses of $96,000 per year and a Market Value of $40,000 at the end of 3 years. The existing machine is being depreciated by the straight-line method using a 15-year class-life period. If the After-Tax MARR Rate is 12% per year and the Effective Tax Rate Is 45%, perform an After-Tax Cash Flow Analysis to determine if the existing manufacturing line should be kept or replaced by the new manufacturing.

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Financial Management: Lincoln electric is considering buying a new welder
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