Obtain the desired after-tax rate of return

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Reference no: EM132088981

Question: Zeon, a large, profitable corporation, is considering adding some automatic equipment to its production facilities. An investment of $120,000 will produce an annual benefit of $40,000. If the firm uses sum-of-years'-digits depreciation, an 8-year useful life, and $12,000 salvage value, will it obtain the desired 12% after-tax rate of return? Assume that the equipment can be sold for its $12,000 salvage value at the end of the 8 years. Also assume a 40% income tax rate for state and federal taxes combined.

Reference no: EM132088981

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