Purchase of a new piece of equipment

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A large profitable company, in the 40% combined federal/state tax bracket,is considering the purchase of a new piece of equipment that will yield benefits of $10,000 in Year 1, $15,000 in Year 2, $20,000 in Year 3, and $20,000 in Year 4. The equipment is to be depreciated using 5-year MACRS depreciation starting in the year of purchase (Year 0). It is expected that the equipment will be sold at the end of Year 4 at 20% of its purchase price. What is the maximum equipment purchase price the company can pay if its after-tax MARR is 10%?

Reference no: EM131810372

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