A drug store is looking into the possibility of installing a “24/7” automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be depreciated by the SL method. The store’s effective income tax rate is 40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the purchase of this prescription refill system?
A drug store is looking into the possibility of installing a “24/7” automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be depreciated by the SL method. The store’s effective income tax rate is 40%, and the after-tax MARR is 12% per year. What is the maximum amount that is justified for the purchase of this prescription refill system?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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A drug store is looking into the possibility of installing a “24/7” automated prescription refill system to increase its projected revenues by $20,000 per year over the next 5 years. Annual expenses to maintain the system are expected to be $5,000. The system will have no market value at the end of its 5-year life, and it will be
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