Determine if the grader purchase was a wise decision

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Reference no: EM131530374

A new road grader was purchased for 200K by a construction company. It expects to make a gross income annually of 50K after all expenses are paid. The estimated salvage value at the end of 5 years is $50K. The company employs straight line depreciation. At the end of year 5, however, the road grader was sold for $201K. The corporate tax rate for the company on ordinary gains is 30% and the capital gains tax rate is 20%. Use a 10% after-tax MARR and the EUAW technique to determine if the grader purchase was a wise decision.

Reference no: EM131530374

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