| Question |
A large profitable company, in the 40% federal/state tax bracket, is considering the purchase of a new piece of equipment. The new equipment will yield benefits of $10,000 in Year 1, $15,000 in Year 2, $20,000 in. Year 3, and $20,000 in Year4, the equipment is to be depreciated using 5-year MACRS starting in the year of purchase (Year 0). It is expected that the equipment will be sold at the end of fourth year at 20% of its purchase price. What is the maximum equipment purchase price the company can pay if is after-tax is 10%? |
