What are annual depreciation charges

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Reference no: EM13257109

You must evaluate the proposal to buy new milling machine. The base price is $108,000, and shipping an installation costs would add another $12,500. The machine falls into MACRS 3 -year class and it would be sold after 3 years for $65,000. The applicable rates of depreciation are 33%, 45%, 15%, and 7%. The machine requires a $5,500 increase in working capital. There would be no effect on revenues, but pretax labor cost will decline by $44,000 per year. The marginal tax rate is 35% and WACC is 12%.

a. What is an initial cost of the investment?

b. What are annual depreciation charges?

Reference no: EM13257109

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