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2.3. Rockford Company plans to buy a new machine for $80,000, which will save the company $18,000 annually. Rockford will depreciate the machine on the
2.3. Rockford Company plans to buy a new machine for $80,000, which will save the company $18,000 annually. Rockford will depreciate the machine on the ACRS with three-year life, the annual depreciation being 23%, 47%, and 30%. The company will use the equipment for 5 years, and then sell it for $9,000. The tax rate of the company is 32% and it will use 13% as the discount rate. Should Rockford buy the machine? No, NPV = $13,671.33
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