A large and profitable company, in the 34% marginal tax bracket, is considering the purchase of a new piece of machinery that will yield benefits of $10,000 for Year 1, $15,000 for Year 2, $20,000 for Year 3, $20,000 for Year 4, and $20,000 for Year 5. The machinery is to be depreciated by using the modified accelerated cost recovery system (MACRS) with a 3-year recovery period. The MACRS percentages are 33.33, 44.45, 14.81, 8.41, respectively, for Years 1, 2, 3, and 4. The company believes the machinery can be sold at the end of 5 years of use for 25% of the original purchase price. If the company requires a 12% after-tax rate of return, what is the maximum purchase cost it can pay?
A large and profitable company, in the 34% marginal tax bracket, is considering the purchase of a new piece of machinery that will yield benefits of $10,000 for Year 1, $15,000 for Year 2, $20,000 for Year 3, $20,000 for Year 4, and $20,000 for Year 5. The machinery is to be
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