Question: Your company has purchased equipment for 50 000 that will reduc
Your company has purchased equipment for $50,000 that will reduce materials and labor costs by $14,000/year for N years. After N years, there will be no further need for the machine, and because it is specially designed, it will have no MV at any time. However, the IRS has ruled that you must depreciate the equipment on a 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 10% per year after taxes on its investment?
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