Fedex can purchase large-volume copier

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FedEx can purchase a large-volume copier for $18,000 and depreciates it by straight-line depreciation. The net benefits from the copier, before deducting depreciation, are $1000 at the end of the first year and increasing $1000 per year after that (second year equals $2000, third year equals $3000, etc.), until disposal at the end of 10 years. During the 10-year period, there will be an inflation rate of 5%. FedEx has a 35% combined incremental tax rate. If FedEx requires a real 9% after-tax rate of return on its investments, should the firm purchase the copier? Why?

Reference no: EM131173427

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