Question
This question is different from others answered already. Please, don't copy and paste other results since they will be wrong. Thank you. The profitable Palmer
This question is different from others answered already. Please, don't copy and paste other results since they will be wrong. Thank you.
The profitable Palmer Golf Cart Corp. is considering investing $300,000 in special tools for some of the plastic golf cart components. The present golf cart model will continue to be manufactured and sold for 5 years, after which a new cart design will be needed, together with a different set of special tools. The saving in manufacturing costs, owing to the special tools, is estimated to be $150,000 per year for 5 years. Assume MACRS depreciation for the special tools and a 27% combined income tax rate. (a) What is the after-tax payback period for this investment? (b) If the company wants a 12% after-tax rate of return, is this a desirable investment?
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