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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 409 Weeks Ago, 1 Day Ago |
| Questions Answered: | 66690 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available from a public utility. The company has computed depreciation by the straight-line method with a useful life of 10 years and a zero salvage value. Annual operation and maintenance expenses are $16,000, and property taxes and insurance cost another $3,000 per year. Dependable electric service is now available at an estimated annual cost of $30,000. The company in New Jersey wishes to know whether it would be more economical to dispose of the diesel-electric unit now, when it can be sold for $35,000, or to wait five years when the unit would have to be replaced anyway (with no MV). The company has an effective income tax rate of 50% and tries to limit its capital expenditures to opportunities that will earn at least 15% per year after income taxes. What would you recommend?
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