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A new product is being considered by Stanton Corp. An outlay of $40,000 is required for equipment and an additional net working capital investment of
A new product is being considered by Stanton Corp. An outlay of $40,000 is required for equipment and an additional net working capital investment of $1000 is required. The project is expected to have a 4 year life and the equipment will be depreciated on a straight line basis (equal annual amount) to a $4,000 book value. Producing the new product will reduce current manufacturing expenses by $5,000 annually and Increase earnings (revenue) before depreciation and taxes by $6,000 annually. Stanton's marginal tax rate is 40 percent. Stanton expects the equipment will have a market salvage value of $10,000 at the end of 4 years. Question: What is the depreciation each year over the machine's 4 year life? 9,000 9,250 10,000 10,250 offici
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