The Mellow Machine Company is considering the addition of a computerized lathe to its equipment inventory. The initial cost of the equipment is P600,000, and the lathe is expected to have a useful life of five years and no salvage value. The cost savings and increased capacity attributable to the machine are estimated to generate increases
The Mellow Machine Company is considering the addition of a computerized lathe to its equipment inventory. The initial cost of the equipment is P600,000, and the lathe is expected to have a useful life of five years and no salvage value. The cost savings and increased capacity attributable to the machine are estimated to generate increases in the firm’s annual
|
Year |
Depreciation |
|
1 |
P200,000 |
|
2 |
266,700 |
|
3 |
88,860 |
|
4 |
44,440 |
Mellow is currently in the 40 percent tax bracket. A 10 percent after-tax
The total present value of the depreciation tax shield is:
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