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Shoe Building Inc. (SBI) is considering the purchase of new manufacturing equipment that will cost $15,000 (including shipping and installation). SBI can take out a
Shoe Building Inc. (SBI) is considering the purchase of new manufacturing equipment that will cost $15,000 (including shipping and installation). SBI can take out a four-year, $15,000 loan to pay for the equipment at an interest rate of 3.60%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $150. The equipment has a four-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a three-year asset are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. The corporate tax rate for SBI is 40%. Note: Shoe Building Inc. (SBI) is allowed to take a full-year depreciation tax-saving deduction in the first year. Based on the preceding information, complete the following tables: Value Annual loan payment will be: Annual tax savings from maintenance will be: Year 1 Year 2 Year 3 Year 4 Tax savings from depreciation Net cash flow
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