Zeon a large profitable corportation is considering adding

Reference no: EM13377519

Zeon, a large, profitable corportation is considering adding some automatic equipment to it's production facilities.
An investment of $120,000 will produce an inital annual benefit of $29,000, but the benefits are expected to decline $3000 per year, making second-year benefits $26,000, third-year benefits $23,000, and so forth. If the firm uses Sum-of-years digits depreciation, an 8-year useful life, and $12,000 salvage value, will it obtain the desired 6% after-tax rate of reutrn?

Assume the the equipment can be sold for its $12,000 salvage value at the end of the 8 years. Also assume a 46% income tax rate for state and federal taxes combined.

Reference no: EM13377519

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