Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $200,000 and sell its old low-pressure glueball, which is fully depreciated, for $36,000. The new equipment has a 10-year useful life and will save $44,000 a year in expenses before tax. The opportunity cost of capital is 8%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. What is the Equivalent Annual Savings?
Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $200,000 and sell its old low-pressure glueball, which is fully depreciated, for $36,000. The new equipment has a 10-year useful life and will save $44,000 a year in expenses before tax. The opportunity cost of capital is 8%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. What is the Equivalent Annual Savings?
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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Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $200,000 and sell its old low-pressure glueball, which is fully depreciated, for $36,000. The new equipment has a 10-year useful life and will save $44,000 a year in expenses before tax. The
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
What is the Equivalent Annual Savings?
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