The Simon Machine Tools Company is considering

purchasing a new #4853

The Simon Machine Tools Company is considering purchasing a new set of machine tools to
process special orders. The following financial information is available.• Without the project, the
company expects to have a taxable income of $350,000 each year from its regular business
over the next three years.• With the three-year project, the purchase of a new set of machine
tools at a cost of $50,000 is required. The equipment falls into the MACRS three-year class. The
tools will be sold for $10,000 at the end of project life. The project will be bringing in additional
annual revenue of $80,000, but it is expected to incur additional annual operating costs of
$20,000.(a) What are the additional taxable incomes (due to undertaking the project) during
each of years 1 through 3?(b) What are the additional income taxes (due to undertaking the
new orders) during each of years 1 through 3?(c) Compute the gain taxes when the asset is
disposed of at the end of year 3.View Solution:
The Simon Machine Tools Company is considering purchasing a new

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