The Company is considering the purchase of a flow measurement device. Its purchase price is $12.000 and
Question:
The Company is considering the purchase of a flow measurement device. Its purchase price is $12.000 and another $600 will be spent shipping and installing the device. Use of the device is expected to result in an $8.000 annual increase in revenue, operating expenses are estimated to be $3,000 per year. The meter will be used for five years, then it will be sold for an estimated market value of $3.000. The meter's MACRS property c is five years.
If the effective income tax rate (t) is 40%. If after-tax MRR is 10%.
(should a flow measuring device be purchased, installed, and utilized by the company?
(What is the discounted payback period based on after-tax cash flow?
If the inflation rate is 5% per year, check if purchasing the device is profitable by using PW for the real dollar.
EOY
BTCF
MACRS
Factor
Depreciation Taxable
Income
Income
Tax
ATCF
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer