Question: Acme Corporation is considering purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000
Acme Corporation is considering purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine will be needed for six (6) years, after which it will have a zero-dollar ($0) salvage value. The following Alternative MACRS Depreciation will be used: The allowable depreciation amount as a percentage of the initial cost will be 10%, 20%, 20%, 20%, 20% and 10%, respectively. If the firms income tax rate is 40% and it requires an Internal Rate of Return (IRR) of 15% after taxes, how much can they afford to pay for this machine
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