A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line of
Question:
A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line of doohickeys or install a $1,200,000 press to make the thingamajigs in their plant. It has been calculated that the material and overhead costs would be $0.12 per thingamajig made.
(a) If 800,000 thingamajigs per year are needed and the press is installed, what is the payback period?
(b) The press would be depreciated by straight-line depreciation using a 15-year useful life and no salvage value. Assuming a combined 34% income tax rate, what is the after-tax payback period?
To assist you, fill in the table below and use the ATCF for years 1-15 to calculate the payback period.
Year | BTCF | SL Depreciation | Taxable Income | Income Taxes@ 34% | ATCF |
0 | leave blank | leave blank | leave blank | ||
1-15 |
c) Again, assuming the above15-yr SL depreciation w/ no salvage and a combined 34% income tax rate, what is the after-tax rate of return?
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair