A corporation is considering purchasing a machine that will save $150,000 per year before taxes The cost of operating the machine (including maintenance) is $30,000 per year The machine will be needed for five years, after which it will have a zero salvage value MACRS depreciation will be used, assuming a three year class life The marginal income tax rate is 40 If the firm wants 15 return on investment after taxes, how much can it afford to pay for this machine

Question: A corporation is considering purchasing a machine that will save $150,000 per year before taxes. The cost of operating the machine (including maintenance) is $30,000

A is considering purchasing a machine that will save $150,000 per year before taxes. The cost of operating the machine (including maintenance) is $30,000 per year. The machine will be needed for five years, after which it will have a zero . MACRS depreciation will be used, assuming a three-year class life. The marginal income tax rate is 40%. If the firm wants 15% return on investment after taxes, how much can it afford to pay for this machine?

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