A manufacturing plant buys a tool machine for 120,000 monetary units. Annual operating costs are equal...

Transcribed Image Text:

A manufacturing plant buys a tool machine for 120,000 monetary units. Annual operating costs are equal to 4,000 monetary units. Gross income decreases by 33,000 units in the first year and by 3,000 units each year. The useful life of the plan is 10 years, the SOYD depreciation method and the tax rate is 30%. The scrap value of the car is also estimated at 12,000 units at the end of its useful life. A) What is the rate of return on capital before tax? B) What is the rate of return on investment after taxes? C) If MARR = 15% is assumed, is the purchase of this car in the post-tax review economic? A manufacturing plant buys a tool machine for 120,000 monetary units. Annual operating costs are equal to 4,000 monetary units. Gross income decreases by 33,000 units in the first year and by 3,000 units each year. The useful life of the plan is 10 years, the SOYD depreciation method and the tax rate is 30%. The scrap value of the car is also estimated at 12,000 units at the end of its useful life. A) What is the rate of return on capital before tax? B) What is the rate of return on investment after taxes? C) If MARR = 15% is assumed, is the purchase of this car in the post-tax review economic?

Answer rating: 100% (QA)

Lets break down the information and calculate the rate of return on capital before tax A the rate of return on investment after taxes B and evaluate w... View the full answer