Maxx Transport Company is considering the acquisition of a new airplane at a cost of $500,000. The

Question:

Maxx Transport Company is considering the acquisition of a new airplane at a cost of $500,000. The airplane has an estimated useful life of 10 years, but it qualifies as a 7-year property for tax purposes under MACRS. The annual pretax cash inflows from the new airplane, net of annual operating expenses, is expected to be $130,000 in each of the 10 years the airplane will be used. At the end of the 10-year period, company executives believe that the airplane can be sold for $100,000. The company is in a 40% income tax bracket, and its weighted-average is 15%.
Required:
Determine the of the investment in the new airplane. (Use the MACRS rate provided in Exhibit 22-4.)
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