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What is the equivalent annual saving from the purchase

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Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $20,000 and sell its old low-pressure glueball, which is fully depreciated, for $3,000. The new equipment has a 10-year useful life and will save $5,000 a year in expenses. The opportunity cost of capital is 12%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately.

Reference no: EM132467093

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