Solved

Eureka Company Is Considering Replacing an Old Computer with a New

Question 130

Multiple Choice

Eureka Company is considering replacing an old computer with a new computer. The following data relate to this investment decision:
 Cost of the new computer $40,000 Annual cash operating costs of the new computer $10,000 Working capital needed now for the new computer $2,000 Useful life of the new computer 6 Years  Salvage value of the new computer at the End of six years $3,000 Original cost of the old van two years ago $18,000 Salvage value of the old computer now $4,000 Salvage value of the old computer six years from now $0\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%30 \% . The income tax rate is also 30%30 \% , and the company's after-tax cost of capital is 12%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.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents