Chapter 7: Net Present Value and Capital Budgeting

Before-tax operating costs are lower by $10,000 per year for eight years if the firm purchases the new equipment. Lower operating costs raise net income, implying a larger tax bill. Increased annual taxes due to higher net income = $10,000 * 0.34 = $3,400. If the firm purchases the new equipment, its net income will be $10,000 higher but it ... ................
................