| Question |
A salad oil bottling plant can either purchase caps for the glass bottles at 5 cents each or install $500,000 worth of plastic molding equipment and manufacture the caps at the plant. The manufacturing engineer estimates the material, labor, and other costs would be 3 cents per cap. (a) If 12 million caps per year are needed and the molding equipment is installed, what is the payback period? (b) The plastic molding equipment would be depreciated by straight-line using a 5-year useful life and no . Assuming a 40% income tax rate, what is the after-tax payback period, and what is the after-tax rate of return? |
