Determining the marginal tax rate

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Dangles bagels is contemplating an expansion into pizza rolls. The new pizza roll machine has a purchase price of 50,000, an estimated useful life and MACRS class life of 3 years, and salvage value of 10,000. the applicable depreciation rates are 33%, 45%, 15%, and 7%. the new machine will require NWC to increase by 5,000 and would be recovered at the end of the projects 3 year life. They expect EBIT to increase by 20,000 annually. their marginal tax rate is 40% and they have a 12%WACC. Should they take on the new project?

Reference no: EM132509295

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