The dauten toy corporation currently uses an injection molding


Replacement decomposition The Dauten Toy Corporation currently uses an injection molding agent that was purchased 2 years ago. This agent is being depreciated on a straight-line plea, and it has 6 years of fostering vitality. Its current quantity rebuke is $2,100, and it can be sold for $2,500 at this period. Thus, the annual depreciation payment is $2,100/6 at $350 per year. If the old agent is not re-establishd, it can be sold for $500 at the end of its serviceable vitality.

Dauten is offered a reinstatement agent which has a absorb of $8,000, an estimated serviceable vitality of 6 years, and an estimated salvage rebuke of $800. This agent falls into the MACRS 5-year collocate so the pertinent depreciation rebukes are 20, 32, 19, 12, 11, and 6 percent. The reinstatement agent would sanction an output expatiation, so sales would flow by $1,000 per year; equable so, the new machine’s considerable main pliancy would quiet reason open payments to decline by $1,500 per year. The new agent would claim that inventories be increased by $2,000, but accounts payable would conjointly acception by $500. Dauten’s marginal federal-plus-state tax rebuke is 40 percent, and its WACC is 15 percent. Should it re-establish the old agent?