Question: Harrison Co. is currently spending $100,000 per year with a supplier that provides a necessary component. It is estimated that the firm could save $40,000

Harrison Co. is currently spending $100,000 per year with a supplier that provides a necessary component. It is estimated that the firm could save $40,000 of the $100,000 per year in operating expenses if they made the component themselves. However, they would have to purchase equipment costing $125,000 and lasting five years with no salvage value. If straight-line depreciation is used, calculate the actual pretax ROI and after-tax ROI on the investment. Tax = 45%.

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