Task1. Wahoo rendering is planning for the replacement of the battery of 5 Expeller presses, which are employed to separate tallow from meat and bone meal. Anderson International has offered to sell the firm five brand new Mega two hundred Expeller presses for $120,000. The specifications for the Mega two hundred include a case hardened worm assembly and the double reduction gearbox. The new presses can be depreciated to a zero salvage value over 4 years by using straight-line depreciation. When the required yearly maintenance, with a total yearly cost of $10,000, is performed on schedule at the end of each and every year, the new presses will have an economically useful life of ten years. The projected future maintenance costs and salvages values for the 5 older Expeller presses at present in use are, Before-Tax After-Tax.
|
Year
|
Maintenance
|
Salvage
|
|
0
|
$8,000
|
$24,000
|
|
1
|
15,000
|
19,800
|
|
2
|
20,000
|
13,200
|
|
3
|
40,000
|
6,600
|
Wahoo rendering has a 40 percent corporate tax rate and a required return of a 10 percent. Supposing the purchase price and maintenance costs for a new Mega 200 Expeller press will remain stable verify when the old presses must be replaced.