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23. Equivalent annual cash flow Look at Problem 22 where you calculated the equiva- lent annual cost of producing reformulated gasoline in California. Capital investment
23. Equivalent annual cash flow Look at Problem 22 where you calculated the equiva- lent annual cost of producing reformulated gasoline in California. Capital investment was $400 million. Suppose this amount can be depreciated immediately for tax purposes. The marginal tax rate, including California taxes, is 25%, the cost of capital is 7%, and there is no inflation. The refinery improvements have an economic life of 25 years. a. Calculate the after-tax equivalent annual cost. b. How annual cost? (Note: Extra income from 24 Equivalent annual cash flow Deutsche Transnor much extra would retail gasoline customers have to pay to cover this equivalent st? (Note: Extra income from higher retail prices would be taxed.) 23. Equivalent annual cash flow Look at Problem 22 where you calculated the equiva- lent annual cost of producing reformulated gasoline in California. Capital investment was $400 million. Suppose this amount can be depreciated immediately for tax purposes. The marginal tax rate, including California taxes, is 25%, the cost of capital is 7%, and there is no inflation. The refinery improvements have an economic life of 25 years. a. Calculate the after-tax equivalent annual cost. b. How annual cost? (Note: Extra income from 24 Equivalent annual cash flow Deutsche Transnor much extra would retail gasoline customers have to pay to cover this equivalent st? (Note: Extra income from higher retail prices would be taxed.)
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