A company is considering the purchase of a capital asset for $120,000.
Installation charges needed to make the asset serviceable will total $25,000. The asset will be depreciated over six years using the​ straight-line method and an estimated salvage value ​(SV6​) of ​$22,000. The asset will be kept in service for six​ years, after which it will be sold for $27,000. During its useful​ life, it is estimated that the asset will produce annual revenues of

$25,000. Operating and maintenance (O&M) costs are estimated to be

$5,000 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 −$72,738. By how much would the annual revenues have to increase to make the purchase of this asset justifiable on a before-tax basis?

 

a. Calculate the after-tax cash flows and fill in the table below. (Round to the nearest dollar.) More Info N 1 2 3 4 5 6 7 8 9 10 EOY 0 Single Payment Compound Amount Factor To Find F Given P F/P 1.1500 1.3225 1.5209 1.7490 2.0114 2.3131 2.6600 3.0590 (A) BTCF, S 0 3.5179 4.0456 Present Worth Factor To Find P Given F PIF 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 (C)-(A)-(B) (B) Depreciation, $ Taxable Income, S Discrete Compounding; i-15% Uniform Series Compound Amount Factor To Find F Given A F/A 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 13.7268 16.7858 20.3037 Present Worth Factor To Find P Given A P/A 0.8696 1.6257 2.2832 2.8550 3.3522 3.7845 4.1604 4.4873 4.7716 5.0188 D--0.25(C) Income Taxes, $ Sinking Fund Factor To Find A Given F A/F 1.0000 0.4651 0.2880 0.2003 0.1483 Print Done 0.1142 0.0904 0.0729 0.0596 0.0493 Capital Recovery Factor To Find A Given P A/P 1.1500 0.6151 0.4380 0.3503 0.2983 0.2642 0.2404 0.2229 0.2096 0.1993 (E)-(A) + (D) ATCF, $ U Uniform Gradient Gradient Present Worth Factor To Find P Given G P/G 0.0000 0.7561 2.0712 3.7864 5.7751 7.9368 10.1924 12.4807 14.7548 16.9795 Gradient Uniform Series Factor To Find A Given G A/G 0.0000 0.4651 0.9071 1.3263 1.7228 2.0972 2.4498 2.7813 3.0922 3.3832 - X