Equipment that will reduce pretax operating costs

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Reference no: EM131069108

Madera Produces Inc. considers a $75,000 piece of equipment that will reduce pretax operating costs by $18,000 per year over the 6-year period. There will be an increase in net working capital by $5,000. This equipment falls into the MACRS 5-year class and has a salvage value of $5,000. Madera Produces is in a 30% tax bracket and requires a 8% return. Should Madera Produces Inc. purchase this piece of equipment? Why?

Reference no: EM131069108

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