You consider purchasing a new computing system, including networking, for your sales force for...

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You consider purchasing a new computing system, including networking, for your sales force for $112,000. The system has a 6-year useful life and no salvage value. Your sales force is expected to generate an additional $37,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate 40%. Annual inflation 4% Fill in the following table assuming MACRS depreciation rates (6 points) a. Year Pretax After tax Real after Depreciation Taxable Tax owed Inflation income income income adjustment factor tax income $37,000 $22, XXXXXXXXXX $37,000 2 $37,000 3 $37,000 4 $37,000 5 $37,000 b. If your MARR why not? (4 points) 15%, should you purchase this system based on your real after-tax income? Why or

Rinki · Accepted Answer

YEAR
	
PRETAX INCOME
	DEPRECIATION
(REFER WORKING NOTE 1)
	
TAXABLE INCOME ($)
	
TAX OWED ($)
	
AFTER TAX INCOME ($)
	
INFLATION ADJUSTMENT FACTOR
	
REAL AFTER-TAX INCOME ($)
	1
	$37000
	22400.00
	14600.00
	5840.00
	8760.00
	0.961
	8418.36
	2
	$37000
	35840.00
	1160.00
	464.00
	696.00
	0.924
	643.104
	3
	$37000
	21504.00
	15496.00
	6198.40
	9297.60
	0.889
	8265.56
	4
	$37000
	12902.40
	24097.60
	9639.04
	14458.56
	0.855
	12362.07
	5
	$37000
	12902.40
	24097.60
	9639.04
	14458.56
	0.

You consider purchasing a new computing system, including networking, for your sales force for $112,000. The system has a 6-year useful life and no salvage value. Your sales force is expected to...

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