Question

"The Simon Machine Tools Company is considering purchasing a new set of machine tools to process special orders. The following financial information is available. - Without the project, the company expects to have a taxable income of $448,000 each year from its regular business over the next three years. - With the three-year project, the purchase of a new set of machine tools at a cost of $58,000 is required. The equipment falls into the MACRS three-year class. The tools will be sold for $13,000 at the end of project life. The project will be bringing in additional annual revenue of $74,000, but it is expected to incur additional annual operation of $27,000. What are the gains tax it pays at the end of year 3 if the tax rate is 34%?"

Answer 1