Question
A company is purchasing equipment (7yr MACRS) for $50,000. It estimates the savings associated with the equipment to be $30,000/year. The annual costs of operating
A company is purchasing equipment (7yr MACRS) for $50,000. It estimates the savings associated with the equipment to be $30,000/year. The annual costs of operating the equipment will be $10,000. The useful life of the equipment is 4 years after which time it will be sold for$15,000. The company has a 34% combined income tax rate and uses an after-tax MARR of 12%.
- Using MACRS depreciation, calculate the after-tax cash flows for this investment and using IRR determine if this is a good investment.
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
