Assume no salvage value.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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For many firms, environmental regulation and oversight are converting external "social costs" to internal "real
costs." TDE Industries is considering investing in equipment to reduce emissions. Without the investment they
expect to incur fines and fees of $750,000 per year. TDE uses a 28% combined tax rate, an after-tax MARR of
20%, and will depreciate such equipment as a 5-year MACRS property.
Management has asked you to determine the maximum amount they should pay for equipment to eliminate
these fines. Use a 6-year study period.
Assume no salvage value.
5 Year MACRS Table
Year
123456
6
MACRS %
20.00%
32.00%
19.20%
11.52%
11.52%
5.76%
100.00%
Transcribed Image Text:For many firms, environmental regulation and oversight are converting external "social costs" to internal "real costs." TDE Industries is considering investing in equipment to reduce emissions. Without the investment they expect to incur fines and fees of $750,000 per year. TDE uses a 28% combined tax rate, an after-tax MARR of 20%, and will depreciate such equipment as a 5-year MACRS property. Management has asked you to determine the maximum amount they should pay for equipment to eliminate these fines. Use a 6-year study period. Assume no salvage value. 5 Year MACRS Table Year 123456 6 MACRS % 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 100.00%
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