• Massey Machine Shop is considering a project to improve their production efficiency. They are trying to decide whether it is a good idea or not to buy an automated injection molding machine which will result in reducing pre-tax costs by $160,000 for each of the next four years. The molding machine will cost $480,000 and the IRS says it must be depreciated as 5-year MACRS equipment. Massey Machine Shop believes they can sell the machine for $70,000 at the end of four years. The molding machine will require an initial investment to increase inventory by $20,000, and then an additional inventory increase of $3,000 for each succeeding year of the project. Massey’s tax rate is 35% and uses a discount rate of 14%.
Massey Machine Shop is considering a project to improve their production efficiency. They are trying to decide whether it is a good idea or not to buy an automated injection molding machine which will result in reducing pre-tax costs by $160,000 for each of the next four years. The molding machine will cost $480,000 and the IRS says it must be
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