TAILIEUCHUNG - CAPITAL BUDGETING Shenandoah Furniture, Inc.

Ashley’s first major initiative in wellness and employee engagement started in 2007 with a commitment to tobacco cessation. A six month notice was provided prior to nicotine testing for all employees. Those who tested positive were given the opportunity to enroll in smoking cessation programs and access to appropriate medications at no cost. The company screened options and then provided a list of acceptable smoking cessation programs in all states where they have operations. A $5/week payroll deduction was made for those employees who tested positive and did not enroll in an acceptable course. Nicotine testing is now conducted. | CAPITAL BUDGETING Shenandoah Furniture Inc. Shenandoah Furniture is considering replacing one of the machines in its manufacturing facility. The cost of the new machine will be 76 120. Transportation will cost an additional 2 500 and the new machine will increase the need for working capital by 1 400. The new asset will be depreciated using the MACRS technique over a 5 year period. The company expects to dispose of the machine in 6 years. The expected salvage value for the machine at that time is 2 300. The savings before depreciation and taxes that are associated with the new and old machines are expected to be as follows New Asset Old Asset Year 1 28 000 Year 1 2 000 Year 2 25 000 Year 2 2 000 Year 3 19 000 Year 3 2 000 Year 4 16 000 Year 4 2 000 Year 5 14 000 Year 5 2 000 Year 6 5 000 Year 6 2 000 The old machine the one being replaced is now 4 years old and can be sold today for 14 300. When originally purchased this machine cost 54 600. If kept the scrap value of the old machine will be zero in 6 more years. The accumulated depreciation on the old asset is currently 45 154. The depreciable life for the machine is the same as for the new machine five years. The hurdle rate for the company is 12 . The firm is in the 34 tax bracket. Using the various evaluation methods for capital budgeting . net present value method and the internal rate of return method determine whether or not the firm should purchase the new asset. Solution To Shenandoah Furniture Capital Budgeting Problem Since depreciation is a tax deductible item it affects the amount of the savings that we get to keep after the government takes its cut . So we first need to calculate what the change in depreciation will be if we decide to buy the new equipment. Depreciation on the New Asset Depreciable Cost 78 620 MACRS Year 1 Value Depreciation 15 724 Year 1 Year 2 Year 2 25 158 Year 3 Year 3 15 095 Year 4 Year 4 9 041 Year 5 Year 5 9 041 Year 6 Year 6 4 560 Unused

• Kiến trúc - Xây dựng
• Chemotaxonomic Study
• Quinone Compounds
• Heartwood
• Javanese Teak
• Using GC MS
• Gas Chromatographic
• Compounds in Field Peas
• Chemotaxonomic
• Study Based