Eureka Company Is Considering Replacing an Old Computer with a New

question 141

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 approximate present value of the after-tax non-operating cash inflows that will occur in Year 6? (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

• A) $1,064.
• B) $1,773.
• C) $2,077.
• D) $2,533.

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