In: Finance
Problem: The possibility of acquiring new machinery at a cost of $ 45,000 is being evaluated, which may be depreciated using the 5-year MACRS method. The machine must save $ 23,000 annually during the 5 years of its useful life and maintenance costs are estimated at $ 7,300 annually.
a) If the company is taxed at a rate of 42%, determine if the
investment meets the requirement of providing a minimum return of
12% after taxes (After-Tax analysis).Assume that at the end of its
useful life, the machine can be sold for $ 10,000
b) If the average inflation rate for the period is estimated at
3.2%, Calculate the real return on the investment after considering
inflation
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