Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $110,000 and sell its old low- pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $24,000 a year in expenses. The opportunity cost of capital is 10%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $110,000 and sell its old low- pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $24,000 a year in expenses. The opportunity cost of capital is 10%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $110,000 and sell its old low-
pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will save $24,000 a year in
expenses. The opportunity cost of capital is 10%, and the firm's tax rate is 21%. What is the equivalent annual saving from the purchase
if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2
decimal places.)
oints
X Answer is complete but not entirely correct.
Equivalent annual savings
1,896.00
raw
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