A company is purchasing a new equipment in Class 8 (20% CCA rate — declining balance class, half year rule applicable) in 2018 for $32,000. The machine is expected to result in annual revenue of $14,000 for each of the next five years and will be sold at the end of that time for an expected salvage value of $12,000. Maintenance expenses are expected to be $1,400 for the first year and to increase by $200 per year for each successive year of operation. The company has an effective tax rate of 40% and requires an after-tax MARR of 8%. What is the present worth of the proposed purchase? Use the CTF and CSF method.
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