The Carrolton Stein Corporation is considering replacing its existing decal printing
press with a larger one. The existing press can produce up to 10 decals at a time. The
larger press will be able to produce up to 20 decals. The existing press can be sold
today for $10,000, net of taxes. The new press will cost $75,000 and is expected to have
a 5-year economic life, at which time it is not expected to have any market value. (If
the larger press is not purchased, the existing press is not expected to have any market
value at that point either.)If the larger press is purchased, revenues are expected to
increase from $100,000 a year to $128,000 a year. Labor expenses are expected to
increase from $50,000 to $55,000 a year. If the appropriate cost of capital is 15%, should
Carrolton Stein Corporation invest in the larger press?

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The Answer of The Carrolton Stein Corporation is considering replacing its existing decal printing
press with a larger one. The existing press can produce up to 10 decals at a time. The
larger press will be able to produce up to 20 decals. The existing press can be sold
today for $10,000, net of taxes. The new press will cost $75,000 and is expected to have
a 5-year economic life, at which time it is not expected to have any market value. (If
the larger press is not purchased, the existing press is not expected to have any market
value at that point either.)If the larger press is purchased, revenues are expected to
increase from $100,000 a year to $128,000 a year. Labor expenses are expected to
increase from $50,000 to $55,000 a year. If the appropriate cost of capital is 15%, should
Carrolton Stein Corporation invest in the larger press?

The Carrolton Stein Corporation Is Considering Replacing Its Existing Decal