3 4,400 16,000
Flatte Restaurant is considering the purchase of a $ 10,200 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straightline method. The machine will produce 2,100 soufflés per year, with each costing $ 2.50 to make and priced at $ 5.20. Assume that the discount rate is 12 percent and the tax rate is 35 percent.
The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 40 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project.