Expected before-tax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a 5-year life, and the cost of capital is 10 percent. The applicable depreciation rates are 0.20, 0.32, 0.19, 0.12, 0.11, and 0.06. Assume a 40 percent tax rate. What is the net present value of the new oven?
Mommy Biscuit Inc. is considering the purchase of a new cookie oven. The
original cost of the old oven was $30,000; it is now 5 years old, and it has a
current market value of $13,333.33. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual
Expected before-tax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a 5-year life, and the cost of capital is 10 percent. The applicable depreciation rates are 0.20, 0.32, 0.19, 0.12, 0.11, and 0.06. Assume a 40 percent tax rate. What is the
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