Hard Hat Brick company with a tax rate of 25% and CCA of 25% is looking to
Question:
Hard Hat Brick company with a tax rate of 25% and CCA of 25% is looking to install a new piece of equipment that will reduce new inventory needs by $20,000. The equipment cost is $450,000, and it will require $25,000 each of installation and delivery expenses.As well, the government has a special tax credit program on new equipment purchases that will save the company $70,000 on the new equipment. This new machine will increase pre-tax annual cash flows by $110,000 per year.The salvage value for the machine is $80,000 and its useful life is 8 years. The cost of debt is 5% and WACC is 10%. As well, as the company is an expert on this new machinery, they have agreed to film regular videos on how to run and maintain this new machinery for which they will receive additional annual after tax cash flows of $10,000 a year. What should the company do?
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary