Assume the same facts as in Problem 21-34, except that the plant is located in Buffalo, New York. Dublin Chips has no special waiver on income taxes. It pays a 35% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the same 35% rate.
Required
1. Sketch the after-tax cash inflows and outflows of the modernize and replace alternatives over the 2018-2024 period.
2. Calculate the net present value of the modernize and replace alternatives.
3. Suppose Dublin Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Dublin Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Use the data in Problem 21-34 and this problem to briefly describe in qualitative terms the income tax features that would be advantageous to Dublin Chips.