Question: A computerised system has been proposed for a small tool manufacturing company. The new system costs $150,000, plus another $12,000 to modify it for special
A computerised system has been proposed for a small tool manufacturing company. The new system costs $150,000, plus another $12,000 to modify it for special use by the company. The system has an estimated service life of five years, with a salvage value of $45,000. With this new system, the company will be able to generate additional annual revenues of $160,000. However, it requires a specially trained operator to run the system. This will entail $60,000 in annual labour, $20,000 in annual material expenses, and another $10,000 in annual overhead (power and utility) expenses. Assume that the company uses the double-declining-balance method to depreciate its fixed assets, and pays income tax at the rate of 25%. Find the year-by-year after-tax
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