Eureka Company Is Considering Replacing an Old Computer with a New

question 3

Multiple Choice

Eureka Company is considering replacing an old computer with a new computer. The following data relate to this investment decision:
$\begin{array}{|l|r|}\hline \text { Cost of the new computer } & \$ 40,000 \\\hline \text { Annual cash operating costs of the new computer } & \$ 10,000 \\\hline \text { Working capital needed now for the new computer } & \$ 2,000 \\\hline \text { Useful life of the new computer } & 6 \text { Years } \\\hline \text { Salvage value of the new computer at the End of six years } & \$ 3,000 \\\hline \text { Original cost of the old van two years ago } & \$ 18,000 \\\hline \text { Salvage value of the old computer now } & \$ 4,000 \\\hline \text { Salvage value of the old computer six years from now } & \$ 0 \\\hline\end{array}$
The new computer will belong to Class 10 with a maximum CCA rate of $30 \%$ . The income tax rate is also $30 \%$ , and the company's after-tax cost of capital is $12 \%$ .
-What is the present value of the before-tax proceeds that will be received on the sale of the old computer?

• A) $0.
• B) $1,200.
• C) $2,800.
• D) $4,000.

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Definitions:

Caffeine

A stimulant found in coffee, tea, chocolate, and certain soft drinks, known for its ability to increase alertness and reduce fatigue.

Shakiness

The sensation or visible sign of trembling, often resulting from anxiety, weakness, or illness.

Disinhibited

Exhibiting reduced restraint or a lack of inhibition in behavior and speech, often resulting from emotional distress, brain injury, or other conditions.

Depressant

A class of drugs that reduce neural activity and slow down the functions of the body.