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A company is considering the purchase of a capital asset for $100,000. Installation charges needed to make the asset serviceable will total $30,000. The
A company is considering the purchase of a capital asset for $100,000. Installation charges needed to make the asset serviceable will total $30,000. The asset will be depreciated over six years using the straight-line method and an estimated salvage value (SV) of $16,000. The asset will be kept in service for six years, after which it will be sold for $21,000. During its useful life, it is estimated that the asset will produce annual revenues of $30,000. Operating and maintenance (O&M) costs are estimated to be $6,000 in the first year. These O&M costs are projected to increase by $500 per year each year thereafter. The after tax MARR is 15% and the effective tax rate is 25% a. Compute the after-tax cash flows. b. Compute the after-tax present worth of the project, and use a uniform gradient in your formulation c. The before-tax present worth of this asset is -$46,445. By how much would the annual revenues have to increase to make the purchase of this asset justifiable on a before-tax basis? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year. a. Calculate the after-tax cash flows and fill in the table below. (Round to the nearest dollar) EOY (A) BTCF, S (8) Depreciation, S (C)-(A)-(B) Taxable Income, D--0.25(C) Income Taxes, S (E)-(A) (D) ATCF, $ 0
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