Considering the purchase of new high-tech welder

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William's Welding is considering the purchase of a new high-tech welder that will cost $98,000. Installation costs are included. Their old welder has been fully depreciated and has an offer on the table by a competitor in the amount of $8,000. The new welder will be depriciated over a 10-year straight-line depreciation schedule to an estimated salvage value of $20,000.Assuming this new welder will save William's Welding $12,000 per year in production and labor costs, they have determined that the net annual cash flows associated with the purchase of this new equipment will be $10,530. They assume a marginal tax rate of 35%. Are they correct?

Reference no: EM131554091

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