Equity Corp. paid a consultant to study the desirability of installing some new equipment. The consultant recently submitted the following analysis:
Cost of new machine................. $ 100,000
Present value of after- tax revenues from operation... 90,000
Present value of after- tax operating expenses..... 20,000
Present value of depreciation expenses........ 87,500
Consulting fees and expenses............. 750
The corporate tax rate is 40 percent. Should Equity Corp. accept the project?