A mining corporation purchased $120,000 of production machinery and depreciated it using 40% bonus depreciation with the balance using 5-year MACRS depreciation, a 5-year depreciable life, and zero salvage value. The corporation is a profitable one that has a 22% combined incremental tax rate. At the end of 5 years, the mining company changed its method of operation and sold the production machinery for $40,000. During the 5 years, the machinery was used, it reduced mine operating costs by $32,000 a year, before taxes. If the company MARR is 12% after taxes, was the investment in the machinery a satisfactory one? + The answer is IRR= 14.8%, which is satisfactory
A mining corporation purchased $120,000 of production machinery and
At the end of 5 years, the mining company changed its method of operation and sold the production machinery for $40,000. During the 5 years, the machinery was used, it reduced mine operating costs by $32,000 a year, before taxes. If the company MARR is 12% after taxes, was the investment in the machinery a satisfactory one?
+ The answer is IRR= 14.8%, which is satisfactory
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 6 images