About purchasing new stadium equipment

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Reference no: EM131917929

Town Entertainment is thinking about purchasing new stadium equipment that cost $550,000 and would cost another $75,000 to install. the firm falls into the MACRS-3 year class, and it would be sold after three years for $250,000. Although it would have no effect on revenues, the new equipment should save the firm $205,000 per year in before- tax operating costs ( exculding depreciation). the marginal tax rate is 40 percent, and its required rate of return is 15 percent. Should the setter be purchased?

Reference no: EM131917929

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