Determine some of the after-tax cash flows for equipment

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The PARC Co. Inc. asked you to determine some of the after-tax cash flows for equipment used for research and development that is being considered. PARC expects the equipment to operate for five years and to require the purchase of $250,000 worth of capital equipment. The capital equipment will have a resale value of $100,000 at the end of the five years.

PARC plans to use MACRS depreciation schedule for income tax calculations. The income tax rate is 35%. (Use same rate for capital gain/loss). PARC uses an after tax MARR of 12%.

The equipment results in an increase in PARC's before-tax annual, net income of $45,000, find if it is worth investing on this equipment.

Reference no: EM131316385

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