You are analyzing the prospects of installing cost saving machinery. You have the following information:
The machinery will cost $68,000 and will be depreciated straight line (equal amounts) over 4 years.
The machinery will save $32,000 a year.
The machinery will occupy space that would otherwise have been rented for $10,000 a year (before taxes deducted).
The tax rate is 40%.
(Hint: First calculate the net increase in income to be taxed taking into account savings, depreciation and opportunity cost of rentable space)
What will be the increase in taxes per year from installing the machinery? (Your answer should be a positive number.)