Question
12-59) A small-business corporation is considering whether to replace some equipment in the plant. An analysis indicates there are five alternatives in addition to the
12-59) A small-business corporation is considering whether to replace some equipment in the plant. An analysis indicates there are five alternatives in addition to the do-nothing option, Alt. A. The alternatives have a 5-year useful life with no salvage value. Straightline depreciation would be used. Alternatives Cost (thousands) Before-Tax Uniform Annual Benefits (thousands) A $0 $0 B 25 8 C 10 5 D 5 2 E 15 5 The firm has a combined federal and state income tax rate of 26%. If the corporation expects a 8% after-tax rate of return for any new investments, which alternative should be selected?
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