Question: The Able Corporations considering the installation of a small electronic testing device for use in conjunction with a government contract the firm has just won.

The Able Corporations considering the installation of a small electronic testing device for use in conjunction with a government contract the firm has just won. The testing device will cost $20,000, and have an estimated salvage value of $5000 in 5 years when the government contract is finished. The firm will depreciate the instrument by the sum-of-years' –digits method, using 5 years as the useful life and a $5000 salvage value. Assume that Able pays 50% federal and state corporate income taxes and uses 8% after tax in economic analysis. What minimum equal annual benefit must Able obtain before taxes in each of the 5 years to justify purchasing the electronic testing device?

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