What is the maximum purchase price the company can pay

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Reference no: EM13154294

A company is considering the purchase of tractor units that will yield benefits of $10,000 for year 1, $15,000 for year 2, $20,000 for year 3, $20,000 for year 4, and $20,000 for year 5. The depreciation system used by company is MACRS-GDS, and the effective tax rate is 34%. The company believes that the tractor units can be sold at the end of five years of use for 25% of the original purchase price. What is the maximum purchase price the company can pay for the tractor if it's after tax MARR is 12% per year?

Reference no: EM13154294

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