Tsumagari Company, an electronics company
in Kobe, Japan, is planning to buy new equipment to produce a new product.
Estimated data (monetary amounts are in thousands of Japanese yen) are:

Assume a 60 percent flat rate for income taxes. All revenues and expenses
other than amortization will be received or paid in cash. Use a 14 percent discount
rate. Assume a ten-year straight-line amortization for tax purposes. Also
assume that the terminal salvage value will affect the amortization per year.
Compute

Transcribed Image Text:

Cash cost of new equipment now Estimated life in years 400,000 10 Terminal salvage value 50,000 Incremental revenues per year 320,000 Incremental expenses per year other than amortization 165,000