Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Piute Company is considering an investment in new equipment which costs $50,000. The useful life of the equipment is five years and there is no
Piute Company is considering an investment in new equipment which costs $50,000. The useful life of the equipment is five years and there is no salvage value. The company uses the following depreciation amounts for tax purposes: Year 1, $7,500; Year 2, $11,000; Years 3, 4 and 5, $10,500 per year. The new equipment will provide before tax operating net cash inflows of $20,000 per year. The company's marginal tax rate is 40% and the appropriate discount rate is 12% What is the after tax payback period? Select one: a. 3.0 years. O b. 3.2 years. O c. 3.9 years. O d. 4.0 years
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