The outcome supposing that the latter’s payoff in the southwest cell is positive, and also the playing strategy of the company in the modified licensing game.

Question

A mining corporation purchased $120,000 of production machinery and depreciated it using 40% bonus depreciation with the balance using 5-year MACRS depreciation, a 5-year depreciable life, and zero salvage value. The corporation is a profitable one that has a 22% combined incremental tax rate. At the end of 5 years the mining company changed its method of operation and sold the production machinery for $40,000. During the 5 years the machinery was used, it reduced mine operation costs by $32,000 a year before taxes. If the company MARR is 12% after taxes, was the investment in the machinery a satisfactory one? Please show every step with formulas and don't use excel. The answer should be 14.8%, thank you.

Answer 1

Question

Chapter 16, Problem 11E

To determine

To calculate: The outcome supposing that the latter’s payoff in the southwest cell is positive, and also the playing strategy of the company in the modified licensing game.

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