Marc Corporation Wants to Purchase a New Machine for $400,000

question 129

Essay

Marc Corporation wants to purchase a new machine for $400,000.Management predicts that the machine can produce sales of $275,000 each year for the next 5 years.Expenses are expected to include direct materials,direct labor,and factory overhead (excluding depreciation)totaling $80,000 per year.The company uses MACRS for depreciation.The machine is considered as a 3-year property and is not expected to have any significant residual at the end of its useful years.Marc's income tax rate is 40%.Management requires a minimum of 10% return on all investments.A partial MACRS depreciation table is reproduced below.

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