Outdoor Gear is purchasing equipment costing $485,900 that will lower manufacturing costs by $132,000 a year.The equipment will be depreciated over 8 years using straight-line depreciation to a zero book value.After 8 years,the equipment will be worthless.The discount rate is 16 percent and the tax rate is 34 percent.What is the annual net income from this purchase?

Question

Quizplus · Accepted Answer

Annual depreciation = $485,900 / 8 = $60,737.50
Net income = ($132,000 − $60,737.50)× (1 - 0.34)= $47,033.25

Outdoor Gear Is Purchasing Equipment Costing $485,900 That Will Lower