Question
Talhah Manufacturing is considering the purchase of a new production machine for SAR 529,000. The purchase of this machine will result in an increase in
Talhah Manufacturing is considering the purchase of a new production machine for SAR 529,000. The purchase of this machine will result in an increase in earnings before interest and taxes of SAR 91,000 per year. To operate this machine properly, workers would have to go through a brief training session that would cost SAR 17,000 after taxes. It would cost SAR 22,500 to install the machine properly. Also, because the machine is extremely efficient, its purchase would necessitate an increase in inventory or SAR 23,000. This machine has an expected life of 10 years, after which it will have no salvage value. Assume simplified straight-line depreciation and that this machine is being depreciated down to zero, a 35 percent marginal tax rate, and a required rate of return of 15 percent.
Please calculate the depreciation? show detail steps.
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