Question
XYZ is evaluating a project that would require the purchase of a piece of equipment for $590,000 today. During year 1, the project is expected
XYZ is evaluating a project that would require the purchase of a piece of equipment for $590,000 today. During year 1, the project is expected to have * relevant revenue of $772,000, relevant costs of $193,000, and relevant depreciation of $123,000. XYZ would need to borrow $590,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $343,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 25.75% but less than 29.83% A rate equal to or greater than 36.94% but less than 44.93% A rate less than 21.16% or a rate greater than 44.93% A rate equal to or greater than 21.16% but less than 25.75% A rate equal to or greater than 29.83% but less than 36.94%
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