Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Abbott placed into service a exible manufacturing cell costing $860,000 early this yea r. They nanced $425,000 ofthe initial cost of the cell at 11%
Abbott placed into service a exible manufacturing cell costing $860,000 early this yea r. They nanced $425,000 ofthe initial cost of the cell at 11% per year over 5 years. Gross income due to the cell is expected to be $750,000 with deductible expenses of $465,000. Depreciation is based on MACRS-GDS, and the cell is in the 7-year property class. Abbott's marginal tax rate is 25%, MARR is 9% after taxes, and they expect to keep the cell for 8 years. Determine the PW, FW, AW, IRR. and ERR for the investment if: a. The loan is paid back using Method 1 (interest only at the end of each year of the loan, plus principal at the end of the last year). b. The loan is paid back using Method 2 (equal annual principal payments plus interest on the unpaid loan balance). c. The loan is paid back using Method 3 (equal annual principal plus interest payments during each year of the loan}. d. The loan is paid back using Method 4 (principal plus interest is paid at the end of the loan period). a. Method 1 $ l l $ l l $ l l l % b. Method2 $l l $l l $l l l % c. Method3 $ l l $ l l $ l l l % d.Method4 H l $l l $l l l %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started