An automobile manufacturing company is considering buying special handling devices for food and beverage manufacture. The new tool has a purchase price of $50,000 and zero salvage value. It is expected that the new tooling would generate annual benefits of $25,000 per year.
a) Calculate the after tax cash flow for four years, using a 40% cooperate income tax rate, and a MACRS depreciation schedule.
b) Use present worth analysis to determine whether the company should buy the new tooling if the after-tax MARR is 10%