A drug store is looking into the possibility of installing a "24/7" automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be depreciated by the SL method. The store's effective income tax rate is 40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the purchase of this prescription refill system? (Calculate the Maximum P)
A drug store is looking into the possibility of installing a "24/7" automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be depreciated by the SL method. The store's effective income tax rate is 40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the purchase of this prescription refill system? (Calculate the Maximum P)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![A drug store is looking into the possibility of installing a "24/7" automated prescription refill system
to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to
maintain the system are expected to be $5,000. The system will have no market value at the end of
its 5-year life, and it will be depreciated by the SL method. The store's effective income tax rate is
40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the
purchase of this prescription refill system? (Calculate the Maximum P)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbade5c81-9bd4-4360-833d-be445e4660b0%2Fc7c421d8-b748-4253-80c2-db608fec128d%2Fy44u5ah_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A drug store is looking into the possibility of installing a "24/7" automated prescription refill system
to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to
maintain the system are expected to be $5,000. The system will have no market value at the end of
its 5-year life, and it will be depreciated by the SL method. The store's effective income tax rate is
40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the
purchase of this prescription refill system? (Calculate the Maximum P)
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