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Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the...

Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $60,000 and sell its old low-pressure glueball, which is fully depreciated, for $10,000. The new equipment has a 10-year useful life and will save $14,000 a year in expenses. The opportunity cost of capital is 11%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.).

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Expert Solution

Equivalent Annual Savings = $4352.84

*Please comment if you face any difficulty and please don't forget to provide positive rating*

jeff jeffy answered 2 years ago
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