What is the after-tax payback period for this investment?.
The profitable Palmer Golf Cart Corp. is considering investing $300000 in special tools for some of Show more The profitable Palmer Golf Cart Corp. is considering investing $300000 in special tools for some of the plastic golf cart components. Executives of the company believe the present golf cart model will continue to be manufactured and sold for 5 years after which a new cart design will be needed together with a different set of special tools. The saving in manufacturing costs owing to the special tools is estimated to be $150000 per year for 5 years. Assume MACRS depreciation for the special tools and a 39% income tax rate. (a) What is the after-tax payback period for this investment? (b) If the company wants a 12% after-tax rate of return is this a desirable investment? Show less
What is the after-tax payback period for this investment?
