Problem:
Adams Incorporated wants to buy a new machine, which costs $240,000. Adams will depreciate it fully over its useful life of 6 years, on a straight-line basis. It will then sell the machine for $20,000. Adams has income tax rate of 32% and it uses a discount rate of 12%.
Required:
Question: Calculate the minimum pre-tax annual earnings generated by this machine to justify its purchase.
Note: Provide support for rationale.