Floopy Co has decided to purchase new equipment. They are in the 38% tax bracket. The desired equipment costs $77,000 and it can be financed entirely with a 12% loan which requires annual end-of-year payments of $32,059 for 3 years. The firm will depreciate the equipment under MACRS using a 3-year recovery period (depreciation is 33% in year 1, 45% in year 2 and 15% in year 3). The firm will pay $2,000 per year for a maintenance contract. Calculate the present value of the cash outflows for the purchase alternative.
Floopy Co has decided to purchase new equipment. They are in the 38% tax bracket. The desired equipment costs $77,000 and it can be financed entirely with a 12% loan which requires annual end-of-year payments of $32,059 for 3 years. The firm will depreciate the equipment under MACRS using a 3-year recovery period (depreciation is 33% in year 1, 45% in year 2 and 15% in year 3). The firm will pay $2,000 per year for a maintenance contract. Calculate the present value of the cash outflows for the purchase alternative.
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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Floopy Co has decided to purchase new equipment. They are in the 38% tax bracket.
The desired equipment costs $77,000 and it can be financed entirely with a 12% loan which requires annual end-of-year payments of $32,059 for 3 years. The firm will
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