Nikul Gluon Incorporated is considering the purchase of a new high pressure glueball. It canpurchase the glueball for $80,000 and sell its old low-pressure glueball, which is fullydepreciated, for $14,000. The new equipment has a 10-year useful life and will save$18,000 a year in expenses before tax. The opportunity cost of capital is 10%, and thefirm's tax rate is 21%. What is the equivalent annual saving from the purchase if Gluoncan depreciate 100% of the investment immediately.Note: Do not round intermediate calculations. Round your answer to 2 decimalplaces.× Answer is complete but not entirely correct.Equivalent annual savings$5,252.45

Net cost of the new equipment: Net Cost = Purchase Price of New Equipment - Salvage Value of Old…

Answered: Gluon Incorporated is considering the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 6P

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Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $70,000 and sell its old low-pressure glueball, which is fully depreciated, for $12,000. The new equipment has a 10-year useful life and will save $16,000 a year in expenses before tax. The opportunity cost of capital is 9%, and the firm’s tax rate is 21%. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. equivalent annual savings?
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