The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for
Question:
The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for $540,000. The machine will have a six-year life and will produce before tax cash savings of $200,000 each year. The asset is to be depreciated using the straight-line method with no salvage value. The company's tax rate is 40 percent.
The after-tax net cash inflow on the investment is _____
The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for $540,000. The machine will have a six-year life and will produce before tax cash savings of $200,000 each year. The asset is to be depreciated using the straight-line method with no salvage value. The company's tax rate is 40 percent.
The payback period is_____
Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000; annual cash operating expenses will increase by $7,000; straight-line depreciation is used; the asset has a ten-year life; the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %)