Megan Inc. has a policy of not accepting any investment proposal that requires more than three years to payback. The company is considering the purchase of new drafting equipment for $680,000. The equipment has an estimated useful life of seven years. Megan will use straight-line depreciation for this asset, with no salvage value. Megan's income tax rate is approximately 25%.

Required:

Determine the required before-tax savings for the drafting equipment to meet the company's payback requirement.

Answer rating: 100% (QA)

Total required saving in annual after tax cash inflow 22666667 6800003 A... View the full answer