Question: New equipment would cost $175,000, and it is expected to save $35,000 pet year. It has a 10-year life and a salvage value of $20,000.

New equipment would cost $175,000, and it is expected to save $35,000 pet year. It has a 10-year life and a of $20,000. The target after-tax ROI is 8%. Straight-line depreciation is used. An effective combined tax rate of 45% exists. Does the investment meet the target ROI? What is the actual after-tax ROI?

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