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A box fabricator can either buy plastic straps for its Tufdutiâ crates at 6¢ each or install $700,000 worth of strapping equipment and manufacture the straps at their facility. Their technologist estimates the material, labor, and other costs would be 3¢ per strap.

(a) If 10 million straps per year are needed and the equipment is installed, what is the payback period?

Answer:

Reasoning/Work:

(b) The equipment would be depreciated by straight-line depreciation using a 5-year useful life and no salvage value. Assuming a combined 40% income tax rate, what is the after-tax payback period?

To assist you, fill in the table below and use the ATCF for years 1-5 to calculate the payback period.

Year

BTCF

SL Depreciation

Taxable Income

Income Taxes@ 40%

ATCF

0

leave blank

leave blank

leave blank

1-5

Answer:

Reasoning/Work:

c) Again, assuming a 5 yr SL depreciation w/ no salvage and a combined 40% income tax rate, what is the after-tax rate of return?

Answer:

Reasoning/Work:

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Hubert Koch
Hubert KochLv2
28 Sep 2019
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A salad oil bottling plant can either buy caps for the glass bottles at $0.05 each or install $500,000 worth of plastic molding equipment and manafacture the caps at the plant. The manufacturing engineer estimates the material, labor, and other costs would be $0.03 per cap.

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Please include detailed work.

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1. A corporation with a taxable income of $50 million is considering a new venture that would generate an additional $500,000 per year in taxable income. How much additional federal income tax will they pay on this additional income?

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