Megan Inc Has a Policy of Not Accepting Any Investment Proposal

question 129

Essay

Megan Inc. has a policy of not accepting any investment proposal that requires more than three years to payback. The company is considering the purchase of new drafting equipment for $630,000. The equipment has an estimated useful life of seven years. Megan will use straight-line depreciation for this asset, with no salvage value. Megan's income tax rate, t, is approximately 25%.
Required:
Determine the required before-tax savings per year (rounded to nearest whole number) for the drafting equipment to meet the company's three-year payback requirement.

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Definitions:

Crops

Cultivated plants or agricultural produce, such as grains, vegetables, or fruits, grown for food, fuel, feed, or fiber.

Tubing

Hollow cylinders made from various materials used for transporting fluids, gases, or as structural components in different applications.

Diagram

represents a simplified drawing or plan that demonstrates the arrangement or workings of something, often using symbolic representations.

Wise Use

An approach emphasizing sustainable and judicious use of natural resources to balance ecological and human needs.