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Mitata Company is considering the purchase of new manufacturing equipment that will cost $35,000 (including shipping & installation). Mitata can take out a 4-year, $35,000 loan to pay for the equipment at an interest rate of 8.40%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $350. The equipment has a 4-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41% respectively. The corporate tax rate for Mitata is 35%. Note: Mitata Company is allowed to take a full-year depreciation tax-saving deduction in the first year. What will be the annual loan payment? a. $63,461.12 b. $106.62 c. $10,661.47 d. $12,692.22

Mitata Company is considering the purchase of new manufacturing equipment that will cost $35,000 (including shipping & installation). Mitata can take out a 4-year, $35,000 loan to pay for the equipment at an interest rate of 8.40%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $350. The equipment has a 4-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41% respectively. The corporate tax rate for Mitata is 35%. Note: Mitata Company is allowed to take a full-year depreciation tax-saving deduction in the first year. What will be the annual loan payment? a. $63,461.12 b. $106.62 c. $10,661.47 d. $12,692.22

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mitata Company is considering the purchase of new manufacturing equipment that will cost $35,000 (including shipping & installation). Mitata can take out a 4-year, $35,000 loan to pay for the equipment at an interest rate of 8.40%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $350. The equipment has a 4-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41% respectively. The corporate tax rate for Mitata is 35%. Note: Mitata Company is allowed to take a full-year depreciation tax-saving deduction in the first year. What will be the annual loan payment? a. $63,461.12 b. $106.62 c. $10,661.47 d. $12,692.22
Transcribed Image Text:Mitata Company is considering the purchase of new manufacturing equipment that will cost $35,000 (including shipping & installation). Mitata can take out a 4-year, $35,000 loan to pay for the equipment at an interest rate of 8.40%. The loan and purchase agreements will also contain the following provisions: The annual maintenance expense for the equipment is expected to be $350. The equipment has a 4-year depreciable life. The Modified Accelerated Cost Recovery System's (MACRS) depreciation rates for a 3-year asset are 33.33%, 44.45%, 14.81%, and 7.41% respectively. The corporate tax rate for Mitata is 35%. Note: Mitata Company is allowed to take a full-year depreciation tax-saving deduction in the first year. What will be the annual loan payment? a. $63,461.12 b. $106.62 c. $10,661.47 d. $12,692.22
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