Question

A company is looking at buying equipment for its factory. The initial investment would be $100,000, which would result in a net revenue increase of $200,000 for the next 4 years. The company anticipates selling the equipment at the end of 4 years for $40,000. The company pays a tax rate of 21%. if the company uses straight-line depreciation for the equipment, and expects a MARR of 10% for its investments, then a) determine the company's after-tax cash flow for the investment, and b) use a net present worth calculation on the after-tax cash flows to determine if the company should make this investment.

Answer 1