ABC Corporation is considering purchasing new equipment for its manufacturing process. The equipment costs $120,000 and has
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ABC Corporation is considering purchasing new equipment for its manufacturing process. The equipment costs $120,000 and has a useful life of 5 years. The salvage value at the end of 5 years is expected to be $20,000. The equipment is expected to increase the annual net income by $40,000. The corporation uses straight-line depreciation and has a tax rate of 30%.
a) Calculate the annual depreciation expense for the new equipment.
b) Calculate the after-tax cash inflow for each year.
c) Calculate the payback period for the investment in the new equipment.
d) Calculate the net present value of the investment, using a discount rate of 10%.
Related Book For
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle
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