Calculate the book value of the existing machine

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Reference no: EM133920583

Problem

Rangwato Cosmetics is considering replacing its existing fragrance-mixing machine that was purchased two years ago at a cost of R60,000. The existing machine is depreciated on a straight- line method over five years. The existing machine can be sold today for R60,000. The new machine will cost R91,200 with R10,000 installation cost and R8,800 transportation cost. The use of the new machine will require an additional amount of R12,000 to invest in the working capital. This amount represents a cash outflow. Assume a 28% tax rate per annum.

Task

A. Calculate the book value of the existing machine. Show all calculations.
B. Calculate the tax implication from the sale of the existing machine.
C. Calculate the after-tax proceeds from the sale of the existing machine. Get the instant assignment help.
D. Calculate the initial investment associated with the replacement of the existing machine.

Reference no: EM133920583

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