Your company has purchased equipment (for $65,000) that will reduce materials and labor costs by $14,000 each year for N years. After N years, there will be no further need for the machine, and because the machine is specially designed, it will have no MV at any time. However, you must depreciate the equipment on an SL basis with a tax life of five years. If the effective income-tax rate is 40%, what is the minimum number of years your firm must operate the equipment to earn 12% per year after taxes on its investment?

6 years

7 years

5 years

9 years

10 years

CHOOSE ONE

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