Problem:
Outdoor Gear is purchasing equipment costing $1.2 million that will lower manufacturing costs by $280,000 a year. The equipment will be depreciated over 7 years using straight-line depreciation to a book value of zero. After 7 years, the equipment will be worthless. The discount rate is 14 percent and the tax rate is 35 percent.
Required:
Question: What is the annual net income?
- $111,428.57
- $70,571.43
- $59,600.00
- $38,000.00
- $43,600.00
Note: Show all workings.