Question: please provide the answer as soon as possible.... and try to write all steps its a 20 mark question... Kaylin, a maker of the vaccine
please provide the answer as soon as possible.... and try to write all steps its a 20 mark question...
Kaylin, a maker of the vaccine is considering purchasing biotechnology equipment that costs $380,000. Shipping and installation costs will be an additional $30,000. The equipment will be depreciated based on a 3-year MACRS life. Revenues from the new equipment should be $400,000 the first year and increase 15% each year over the expected 5-year economic life. Operating expenses should be $250,000 the first year and these expenses will increase 10% each year. At the end of 5 years the equipment will be obsolete and have no salvage value. Should Kaylin invest in this new equipment? Assume Kaylin has a cost of capital of 15% and a marginal tax rate of 40%. Use the depreciation schedule listed below: (3- year MACRS Schedule: 33.33%, 44.45%, 14.81%, 7.41%)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
