The profitable Palmer Golf Cart Corp. isconsidering
Chapter , Problem 12-44(choose chapter or problem)
The profitable Palmer Golf Cart Corp. isconsidering investing $300,000 in special tools forsome of the plastic golf cart components. Execu-tives of the company believe the present golf cartmodel will continue to be manufactured and soldfor 5 years, after which a new cart design will beneeded,togetherwith a different set of specialtools.The saving in manufacturing costs, owing tothe special tools, is estimated to be $150,000 peryear for 5 years. Assume MACRS depreciation forthe special tools and a 39% combined income taxrate.(a)What is the after-tax payback period for thisinvestment?(b)If the company wants a 12% after-tax rate ofreturn, is this a desirable investment?
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