book value

The University of Namibia, Copy Centre is said to have been finding it so hard to meet the students’ demand in terms of printing services over the past years. This is due to an increase in students’ population on campus. According to Ms X who is serving as the supervisor at the Copy Centre, UNAM Main Campus, currently they have only one multi-duplicate printing machine which was purchased four years ago at a cost of N$ 100, 000. In order to overcome this challenge, the Copy Centre is contemplating to procure a new multi-duplicate printing machine to replace the current multi-duplicate printing machine. The new multi-duplicate machine would cost N$ 150, 000, and would require installation costs equal to six per cent of the purchase price. The multi-duplicate machine will be depreciated under MACRS using a five-year recovery period and this is the same method having been used for the current multi-duplicate machine. The current multi-duplicate machine can be sold today for N$ 110, 000 net of any removal or clean-up costs. According to Ms X, the proposed replacement will result in an increase of N$ 45, 000 and N$ 15, 000, in the Copy Centre’s current assets and current liabilities; respectively. A corporate tax rate of 40% is applicable.


Use the information above to answer the following questions:


Determine the book value of the current multi-duplicate machine



Compute the tax payable, if any; attributable to the sale of the current machine



Determine the initial outlay associated with the proposed machine replacement



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