Solutions to Chapter 1

12-3 (a) Net Cash Investment. Book value of old machine $ 5,000. Less: market value of old machine 4,000. Operating loss due to sale $ 1,000. x Tax rate x 0.40. Tax savings $ 400 ... OTHER ISSUES IN CAPITAL BUDGETING. 13-1 (a) Annual depreciation charges are $2,000 or ($20,000/10). Thus, the book value of the old machine is $10,000 or ($2,000 x ... ................
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