Considering the purchase of a high volume photocopier

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Staples Business Solutions is considering the purchase of a high volume photocopier. The new machine will cost $150,000 and will last for 5 years at which time it will have a salvage value of $35,000. The new machine will result in before-tax cost savings of $25,000 a year. It will however require an increase in working capital of $10,000. The new photocopier will belong to an asset class that has a CCA rate of 30%. The firm’s tax rate is 35% and the discount rate is 8%. Should Staples buy the new photocopier? Staples Business Solutions is considering the purchase of a high volume photocopier. The new machine will cost $150,000 and will last for 5 years at which time it will have a salvage value of $35,000. The new machine will result in before-tax cost savings of $25,000 a year. It will however require an increase in working capital of $10,000. The new photocopier will belong to an asset class that has a CCA rate of 30%. The firm’s tax rate is 35% and the discount rate is 8%. Should Staples buy the new photocopier?

Reference no: EM13927727

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