Harrison Co. is currently spending $100,000 per year with a supplier that provides a necessary component. It

Question:

Harrison Co. is currently spending $100,000 per year with a supplier that provides a necessary component. It is estimated that the firm could save $40,000 of the $100,000 per year in operating expenses if they made the component themselves. However, they would have to purchase equipment costing $125,000 and lasting five years with no . If straight-line depreciation is used, calculate the actual pretax ROI and after-tax ROI on the investment. Tax = 45%.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...