Calculate the annual tax savings that the firm will realize

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Question - 1) Great Grocery Store, a local retail grocery store, is considering a $200,000 expenditure for new freezers in its Frozen Food Department. These freezers are expected to have a $20,000 salvage value at the end of their eight-year life.

Based on the above information, calculate the annual "Depreciation Expense" for the new freezers. Assume that the straight-line depreciation method is used.

If Great Grocery Store is in the 28% tax bracket, calculate the annual tax savings that the firm will realize due to the tax-deductibility of the non-cash "Depreciation Expense" on these new freezers.

2) The Farm Store, a farm implement retail company, is considering an expenditure of $750,000 for a new storage shed for some of its inventory. The annual after-tax benefit that is expected from this expenditure is estimated to be $225,000. Based on this information, what is the "Payback Period" for this expenditure for the new storage shed?

Reference no: EM133091139

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