Adding some automatic equipment to production facilities

Assignment Help Financial Management

Reference no: EM131902349

Zoon, a large, profitable corporation, is considering adding some automatic equipment to its production facilities. The equipment costs $120,000 and will produce an initial annual benefit of $29,000, but the benefits are expected to decline $3000 per year. The firm uses sum-of-years-digits depreciation over the 3-year useful life of the equipment which has a $12,000 salvage value. Using present worth analysis, determine whether the equipment should be purchased if the after-tax MARR is 6%. Assume that the equipment can be sold for its S12,000 salvage value at the end of the 3 years. Also, assume a 46% income tax rate.

Reference no: EM131902349

Questions Cloud

What is the default risk premium on corporate bonds : If the liquidity premium is 1.05%, what is the default risk premium on the corporate bonds?

Value of the repair exceeds the replacement cost : Whenever the value of the repair exceeds the replacement cost, it is preferable to disinvest from the asset entirely.

Return is reasonable given nature of risks involved : You are making $100,000 investment and feel that 10 percent rate of return is reasonable given the nature of risks involved. What is the main reason why?

Main risks of the peg to the euro for the swiss economy : What were the main benefits and the main risks of the peg to the euro for the Swiss Economy ?

Adding some automatic equipment to production facilities : Zoon, a large, profitable corporation, is considering adding some automatic equipment to its production facilities.

Value constant growth stock : Value a Constant Growth Stock Financial analysts forecast Wal-Mart Stores (WMT) growth for the future to be 14.00 percent.

What are the annual holding costs for the workbooks : Calculate the EOQ for the workbooks. What are the annual holding costs for the workbooks? What are the annual ordering costs?

What is annual operating cash flow of project : Bottoms Up Diaper Service is considering the purchase of a new industrial washer. what is the annual operating cash flow of the project in years 1 to 6?

Calculate and interpret the ratios : Perform a DU point analysis of Eldercare Inc, Assume that the industry average ratios are as follows: calculate and interpret the following ratios:

User Account

All Pages