Kewpie, Inc If Straight- Line Depreciation with a Salvage Value of $32,000

question 6

Essay

Kewpie, Inc. is considering purchasing a new set of packaging and labeling equipment. A comparison of estimated cash flows is shown below. $$\begin{array} { | l | l | l | l | } \hline \text { Item } & \mathrm { P } = 0.2 & \mathrm { P } = 0.15 & \mathrm { P } = 0.65 \\\hline \text { Initial investment, } \$ & 210,000 & 210,000 & 210,000 \\\hline \text { Net annual revenue, } \$ / y = a r & 265,000 & 250,000 & 240,000 \\\hline \text { Market value, } \$ & 30,000 & 32,000 & 37,000 \\\hline \text { Project life, years } & 5 & 5 & 5 \\\hline\end{array}$$ If straight- line depreciation with a salvage value of $32,000 and a useful life of 5 years is used, determine whether Kewpie should invest in the equipment on the basis of the expected value of after- tax PW. Assume an effective tax rate of 35% and a MARR of 10% per year.

---

Definitions:

Death Penalty

A legal punishment in which a person is put to death by the state as retribution for certain crimes.

Homicide Rates

The frequency or number of occasions where an individual unlawfully kills another person, often used as an indicator of societal violence.

Financial Security

The condition of having stable income or other resources to support a standard of living now and in the foreseeable future.

Death Penalty

A legal punishment where the state executes a person as retribution for a crime deemed deserving of death, often surrounded by moral and legal debates.