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PLEASE DO NOT USE EXCEL A company specializing in using the equipment for food and beverages has an effective tax rate of 40% and is
PLEASE DO NOT USE EXCEL
A company specializing in using the equipment for food and beverages has an effective tax rate of 40% and is considering purchasing such a new equipment for $25,000. The equipment has an estimated life of 4 years and a $5,000 salvage value. The annual income for this equipment is expected to be $8,000. The company's MARR is 10 %. The inflation rate () averages 5% per year. The depreciation method is a three-year MACRS class. (a) Complete the following table (15 points): Depreciation TI Income ATCF Inflation factor Year BTCF Year o ATCF Taxes 0 1 N 3 4 4 (b) What is the Year 0 ATCF rate of return (6 points)? (c) Should the company buy this equipment? Why yes or why not (4 points)Step by Step Solution
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