Question
A company ABC bought a 3D printer costing $300,000 for a customer that had given a 5-year contract with the possibility of extending the contract
A company ABC bought a 3D printer costing $300,000 for a customer that had given a 5-year contract with the possibility of extending the contract for another 5 years. The company uses 5 years MACRS depreciation for tax purposes. The income tax rate for the company is 21%. The printer generates $95,000 / year for the first 3 years. After that, the customer canceled the contract and paid ABC $50,000. ABC sold the 3D printer after 3 years for $140,000.
1. Show after-tax cash flow for 3 years.
2. Was it worth this investment if the company was looking for 12% RoR? Justify
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started