The Wolf's Den Outdoor Gear Is Considering Replacing the Equipment

question 8

Multiple Choice

The Wolf's Den Outdoor Gear is considering replacing the equipment it uses to produce tents. The equipment would cost $1.4 million and lower manufacturing costs by an estimated $215,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The life of the equipment is 8 years. The required rate of return is 13% and the tax rate is 34%. What is the net income from this proposed project?

• A) $13,600
• B) $26,400
• C) $32,400
• D) $40,000
• E) $53,600

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