What is the income tax rate

Reference no: EM131507919

Question: Pete's Pizza is planning to purchase a new type of oven that cooks pizza much faster than the conventional oven now used. The new oven is estimated to cost $20,000 (use straight-line depreciation) and will have a 5-year life, after which it will be traded in for $4,000. Pete has calculated that the new oven will allow him to increase his sales revenue by $30,000 a year. His food cost is 30%, labor cost is 40%, and other variable costs are 10% of sales revenue. Assume a 35% income tax rate. For any new investment, Pete wants a minimum 12% return. Use IRR to help him decide if he should purchase the new oven.

Reference no: EM131507919

Questions Cloud

Examine higher requirements that police hiring agencies have : Leadership Personal Issue and Rules ofLaw - Examine the higher (postsecondary education) requirements that police hiring agencies have for potential candidates.

Which machine would be the preferable investment : A restaurant operator wishes to choose between two alternative roll-in storage units. Machine A will cost $9,000 and have a residual value.

Discuss the roles of professional nursing organizations : Discuss the roles of professional nursing organizations in moving and shaping health care policy and nursing practice.

Analyze significance of characteristics of sexual deviance : Case Study: Joran van der Sloot- Analyze the significance of two characteristics of sexual deviance that are applicable to van der Sloot.

What is the income tax rate : Pete's Pizza is planning to purchase a new type of oven that cooks pizza much faster than the conventional oven now used. The new oven is estimated to cost.

Explain the relevance and application of the social contract : Explain the relevance and application of the social contract to Legitimacy Theory in accounting.

How does the disease affect the respiratory system : How does the disease affect the respiratory system in particular? How does it deviate from the definition of health discussed in Module One?

Static aggregate demand and aggregate supply model : Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level, particularly with respect to decreases.

Which would be better investment using discounted cash flow : You have to make a decision either to buy or to rent the equipment for your restaurant. Purchase cost would be $30,000. Of this amount, $7,500 would be paid.

User Account

All Pages