Grey Is Considering the Replacement of Some Machinery That Has

question 55

Essay

Grey is considering the replacement of some machinery that has zero book value and a current market value of $2,800. One possible alternative is to invest in new machinery that costs $30,000. The new equipment has a four-year service life and an estimated salvage value of $3,500, will produce annual cash operating savings of $9,400, and will require a $2,200 overhaul in year 3. The company uses straight-line depreciation.
Required:
Prepare a net-present-value analysis of Grey's replacement decision, assuming an 8% hurdle rate and no income taxes. Should the machinery be acquired? Note: Round calculations to the nearest dollar.

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Definitions:

Gender Schema

Cognitive structures that allow individuals to process information related to gender, including societal roles, behaviors, and expectations.

Gender-Aschematic

Refers to individuals who do not use gender as a major category for organizing information and making judgments about others, viewing people as individuals rather than through the lens of gender stereotypes.

Rosy

Characterized by a hopeful or optimistic perspective, often without considering possible difficulties.

Superstitious Methods

Practices based on belief in luck, magic, or the supernatural, often without scientific basis.