A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line...
A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line of doohickeys or install a $1,200,000 press to make the thingamajigs in their plant. It has been calculated that the material and overhead costs would be $0.12 per thingamajig made.
(a) If 800,000 thingamajigs per year are needed and the press is installed, what is the payback period?
(b) The press would be depreciated by straight-line depreciation using a 15-year useful life and no salvage value. Assuming a combined 34% income tax rate, what is the after-tax payback period?
To assist you, fill in the table below and use the ATCF for years 1-15 to calculate the payback period.
|
Year |
BTCF |
SL Depreciation |
Taxable Income |
Income Taxes@ 34% |
ATCF |
|
0 |
leave blank |
leave blank |
leave blank |
||
|
1-15 |
c) Again, assuming the above15-yr SL depreciation w/ no salvage and a combined 34% income tax rate, what is the after-tax rate of return?
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A widget manufacturer has the options of purchasing thingamajigs
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