Question

Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $90,000 and sell its old low-pressure glueball, which is fully depreciated, for $16,000. The new equipment has a 10-year useful life and will save $20,000 a year in expenses. The opportunity cost of capital is 8%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

the firm’s tax rate is 21%.

Answer 1