- The Ariat Corporation is considering purchasing a new tanning machine for the manufacturing of its Roper Boots. The price is $10,000. The old one can be sold with no salvage value for $3,000. The new one would last for 5 years and save approximately $2,000 per year. If the discount rate is 12% and the company’s tax rate is 35%, what would the impact be using straight-line 5 year depreciation schedule versus using a 5 year MACRS schedule? Which would you use and why?
- SA Precious Stones fabricates artificial emeralds and sells them for $110 a stone.
It costs $55 to make them. The fixed cost each year to run the factory is
The machinery to make these emeralds costs $1 million and is depreciated
straight-line over 10 years with zero salvage value. What is the accounting
What is the NPV break-even given a 35% corporate tax rate and with an
opportunity cost of capital at 6%?
Accounting Breakeven: _______________
NPV Breakeven: _______________