The Cosmo K Manufacturing Group currently has sales of $1400000 per year. It is considering the addition of a new office machine which will not result in any new sales but will save the company $105500 before taxes per year over its 5-year useful life. The machine will cost $300000 plus another $12000 for installation. The new asset will be depreciated using a modified accelerated cost recovery system (MACRS) 5-year class life. It will be sold for $25000 at the end of 5 years. Additional inventory of $11000 will be required for parts and maintenance of the new machine. The company evaluates all projects at this risk level using an 11.99% required rate of return. The tax rate is expected to be 35% for the next decade.
Answer the following questions: