Author Question: The Munsell Color Company is considering the purchase of a new batch polymer-bonding machine for ... (Read 18 times)

ereecah · **on:** Apr 25, 2021

The Munsell Color Company is considering the purchase of a new batch polymer-bonding machine for producing its number one line of crayons. Although the machine being considered will not produce any increase in sales revenues, it will result in the before-tax reduction of labor costs by $200,000 per year. The machine has a purchase price of $250,000, and it would cost an additional $10,000 to install the machine. In addition, to operate this machine, inventory must be increased by $15,000. The machine is categorized as 10-year property. After 2 years, it can be sold for $150,000. The tax rate is 34% and the cost of capital is 15%. What is the IRR for the proposed acquisition?

MACRS Depreciation Rates

Year	10-Year	15-Year
1	10.00%	5.00%
2	18.00%	9.50%
3	14.40%	8.55%

◦ 37%
◦ 39%
◦ 40%
◦ 41%
◦ 42%

ashely1112 · **Reply #1 on:** Apr 25, 2021

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