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What the annual cash savings after tax

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Question - Guemon Company is taking into account the replacement of an old machine now in use with a new machine costing P100,000. The replacement is expected to produce an annual cash savings of P22,500 before income taxes. The estimated useful life of the new machine is ten years with no residual value. The book value of the old machine is P37,500 and is expected to last for another five years. It is being depreciated at P8,000 per year. The income tax rate is 25%. What the annual cash savings after tax?

a. P15,375

b. P16,875

c. P20,520

d. P17,375

Reference no: EM132969877

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