A compacy is planning to buy a new piece of equipment. The equipment costs $65,0

Question

A compacy is planning to buy a new piece of equipment. The equipment costs $65,000 and has a 7 year life and zero salvage value. The equipment will increase the company's net income befor etaxes by 17,000 in each of the 7 years. The company's tax rate is 52%. What is the ROR on the equipment? Analyse using before tax, aftertax no depreciation and aftertax straight light depreciation. The second year sinking fund depreciation, based on 8% interest, is nearest to $3,000 $4,000 $3,500 $4,500 An investment project costs $90,000. It is expected to have an annual net cash flow of $30,000 for five years. What is the project's payback period?

Explanation / Answer

17000*48/65000=12.55%

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