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A small research device can be purchased for $50,000 and depreciated by MACRS (check the property...

A small research device can be purchased for $50,000 and depreciated by MACRS (check the property class). The net benefits from the device, before deducting depreciation, are $7,000 at the end of the first year and increasing $3,500 after that (second year equals $10,500, third year equals $14,000, etc.) until the device is hauled to the junkyard at the end of seven years. During the seven-year period, there will be an inflation rate (f) of 3%. The profitable corporation has a 25% combined federal and state income tax rate. If it requires a real 15% after-tax rate of return on its investment, should the device be purchased?

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Expert Solution

Research device will come under 5-year class property as per MACRS

ekkarill92 answered 1 year ago
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