Determine the rate for computer-based central office switch, Financial Management

Assignment Help:

SWBT Company must decide whether to repair a telephone company computer-based central office switch or purchase a new one. The existing switch originally cost $750,000 and is fully depreciated. The switch can continue to be used if maintenance expenses of $400,000 (this amount is considered a fully taxable expense) are expended now, after which the switch would last 3 more years and have a salvage value of $50,000 at the end of the 3 years.  The new switch will cost $600,000, will last 5 years, and will have a salvage value of $100,000. Due to its age, the old switch will require $20,000 more per year to maintain than the new switch. If the new switch is purchased, the existing switch can be sold in its present condition for $25,000. SWBT has a required return of 12% and a 34% tax rate. What choice should SWBT make?

 


Related Discussions:- Determine the rate for computer-based central office switch

Why firms need funds at certain episodic events, Why firms need funds at ce...

Why firms need funds at certain episodic events A related aspect was that firms need funds at certain episodic events like merger, reorganization, liquidation and soon. A detai

What is adjusted gross income, Q. What is Adjusted Gross Income? Adjust...

Q. What is Adjusted Gross Income? Adjusted Gross Income - Gross income decreased by business and other specified expenses ofindividual taxpayers. Amount of adjusted gross incom

Explain difference between business risk and financial risk, What is the di...

What is the difference between business risk and financial risk? Business risk considers to the uncertainty a company has regarding to its operating income (as well termed as ear

Explain composite currency bond, Explain Composite Currency Bond Compos...

Explain Composite Currency Bond Composite currency bonds are denominated in a currency basket, like SDRs or ECUs, in place of a single currency.They are often known as currency

Explain opportunity costs affect the capital budgeting, How do opportunity ...

How do opportunity costs affect the capital budgeting decision-making process? Opportunity costs imitate the foregone benefits of the alternative not chosen while a capital budge

The ex-dividend price of novis stock, The net income of Novis Corporation i...

The net income of Novis Corporation is $45,000.  The company has 20,000 outstanding shares and a 100 percent payout policy.  The expected value of the firm one year from now is $1,

Explain a variety of factors determining dividend policy, Q. Explain a vari...

Q. Explain a variety of factors determining Dividend Policy? Dividend: - Dividend demotes to that part of net profits of a company which is distributed between shareholders as

Exchange rate changes decrease risk of foreign investment, Would exchange r...

Would exchange rate changes all time increase the risk of foreign investment? Discuss the condition within which exchange rate changes may actually decrease the risk of foreign inv

Difference among currency forward market and futures market, Explain the ba...

Explain the basic differences between the operation of a currency forward market and a futures market. Answer:  The forward market is an OTC market in which the forward contract

Financial objectives of the organisation, A brief scenario for each of two ...

A brief scenario for each of two different organisations is presented. You are advised to read both scenarios before answering the questions that follow. Use the scenario details t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd