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Question: Zeon, a large profitable corporation, is considering adding some automatic to its production faci...

Show transcribed image text Zeon, a large profitable corporation, is considering adding some automatic to its production facility. An investment of will produce an initial annual benefit of $29,000 but the benefits are expected to decline $3000 per year, making second year benefits $26,000, third year benefits $23,000, and so forth. If the firm uses straight-line depreciation, an eight year useful life, and $12,000 salvage value, will it obtain the desired 6% after tax rate-of-return? Assume that the equipment can be sold for its $12,000 salvage value at the end of eight years. Also assume a 46% state-plus-federal income tax rate.

Zeon, a large profitable corporation, is considering adding some automatic to its production facility. An investment of will produce an initial annual benefit of $29,000 but the benefits are expected to decline $3000 per year, making second year benefits $26,000, third year benefits $23,000, and so forth. If the firm uses straight-line depreciation, an eight year useful life, and $12,000 salvage value, will it obtain the desired 6% after tax rate-of-return? Assume that the equipment can be sold for its $12,000 salvage value at the end of eight years. Also assume a 46% state-plus-federal income tax rate.