Should the firm automate the tax rate is 21%

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Reference no: EM133337083

Question: Jaypal Inc. is considering automating some part of an existing production process. The necessary equipment costs $735,000 to buy and install. Automation will save $178,000 per year (before taxes) by reducing labor and material costs. The equipment has a 6-year life and is depreciated to $135,000 on a straight-line basis over that period. It can be sold for $95,000 in six years. Should the firm automate? The tax rate is 21%, and the discount rate is 10%.

Reference no: EM133337083

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