Colors and More is considering replacing the equipment it uses to produce crayons.The equipment would cost $1.37 million,have a 12-year life,and lower manufacturing costs by an estimated $310,000 a year.The equipment will be depreciated using straight-line depreciation to a book value of zero.The required rate of return is 15 percent and the tax rate is 35 percent.What is the net income from this proposed project?
A)$18,508.75
B)$40,211.24
C)$66,441.67
D)$127,291.67
E)$136,709.48

Question

Quizplus · Accepted Answer

Net income = [$310,000 - ($1,370,000/12)] × [1 - 0.35] = $127,291.67

Colors and More Is Considering Replacing the Equipment It Uses