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Table 11.5 Nuff Folding Box Company, Inc. Is Considering Purchasing a New

question 80

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Table 11.5
Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. This outlay would be partially offset by the sale of an existing gluer. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $15,000. The existing gluer has a remaining useful life of five years. If held until year 5, the existing machine's market value would be zero. Over its five-year life, the new machine should reduce operating costs (excluding depreciation) by $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gains.
-The payback period for the project is ________. (See Table 11.5)

Definitions:

Full Term

Refers to a pregnancy that has reached its natural completion, typically around 37 to 42 weeks, resulting in the birth of a newborn.

Cephalocaudal Pattern

A developmental principle where growth and skill development proceed from the head downward through the body.

Proximodistal Pattern

A pattern of growth and development in humans where development proceeds from the center of the body outward to the extremities.

Growth

The process of increasing in size, number, value, or strength.