Students should use that information to assess the following capital investment: Superior Machining, Inc., a mid-size machining company, is considering an expansion of its product line. In order to do so, it must install new equipment at an expected cost of $2 million. Management is looking to fund the entire investment with equity, the providers of which expect a 14% return. Based on its experience with prior investments of the same type, management has developed the following estimates: Year Equipment Tax Operating Purchase Revenue Cost Depreciation 0 $2,000,000 1 $300,000 $200,000 14.3% 2 $600,000 $200,000 24.5% 3 $750,000 $200,000 17.5% 4 $750,000 $200,000 12.5% 5 $750,000 $200,000 8.9% 6 $750,000 $200,000 8.9% 7 $750,000 $200,000 8.9% 8 $750,000 $200,000 4.5% 9 $750,000 $200,000 10 $750,000 $200,000 WN The combined federal and state income tax rate for Superior is 26%. Note: Tax Depreciation is a non-cash charge, meaning that it can be deducted as expense when computing taxable income even though it does not represent an actual cash outlay Students should use that information to assess the following capital investment: Superior Machining, Inc., a mid-size machining company, is considering an expansion of its product line. In order to do so, it must install new equipment at an expected cost of $2 million. Management is looking to fund the entire investment with equity, the providers of which expect a 14% return. Based on its experience with prior investments of the same type, management has developed the following estimates: Year Equipment Tax Operating Purchase Revenue Cost Depreciation 0 $2,000,000 1 $300,000 $200,000 14.3% 2 $600,000 $200,000 24.5% 3 $750,000 $200,000 17.5% 4 $750,000 $200,000 12.5% 5 $750,000 $200,000 8.9% 6 $750,000 $200,000 8.9% 7 $750,000 $200,000 8.9% 8 $750,000 $200,000 4.5% 9 $750,000 $200,000 10 $750,000 $200,000 WN The combined federal and state income tax rate for Superior is 26%. Note: Tax Depreciation is a non-cash charge, meaning that it can be deducted as expense when computing taxable income even though it does not represent an actual cash outlay