Acquire equipment-operating cost is expected to increase

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Reference no: EM13921586

EI plans to acquire equipment, with a 3-year MACRS life, at a cost of $65,000 and extra $7,500 for delivery and installation. EI expects the new equipment will help in boost its revenue by $40,000 annually for next 4 years and the operating cost is expected to increase by $15,000 each year. At the end of 4 year, Anderson expects to sell the equipment for $15,000 (salvage value). The applicable depreciation rates are 33%, 45%,15% and 7%. The net working capital would increase by $12,000 initially, but would be recovered at the end of project's 4-year life. EI’s marginal tax rate is 35% and WACC is 11.5%.

Reference no: EM13921586

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Acquire equipment-operating cost is expected to increase : EI plans to acquire equipment, with a 3-year MACRS life, at a cost of $65,000 and extra $7,500 for delivery and installation. EI expects the new equipment will help in boost its revenue by $40,000 annually for next 4 years and the operating cost is e..

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