Dale Davis Company Is Evaluating a Proposal to Purchase a New

question 17

Essay

Dale Davis Company is evaluating a proposal to purchase a new machine that would cost $100,000 and have a salvage value of $10,000 in four years.It would provide annual operating cash savings of $10,000, as follows:
If the new machine is purchased, the old machine will be sold for its current salvage value of $20,000.If the new machine is not purchased, the old machine will be disposed of in four years at a predicted salvage value of $2,000.The old machine's present book value is $40,000.If kept, in one year the old machine will require repairs predicted to cost $35,000.
Dale Davis's cost of capital is 14 percent.
Required:
Should the new machine be purchased? Why or why not?

---

Definitions:

Modern View

Contemporary perspective or way of thinking in contrast to traditional views.

Existential Import

The implication or assumption within a statement or proposition that asserts the existence of something.

Lakes

Large bodies of standing freshwater formed in hollows on the earth's surface, often fed by rivers or streams.

Existential Import

In logic, the implication that a statement has regarding the existence of the subjects it mentions.