Question
alpha Semiconductor Co. is evaluating whether to add another IC production line. The line would cost $60000 and would have no market value at the
alpha Semiconductor Co. is evaluating whether to add another IC production line. The line would cost $60000 and would have no market value at the end of its 7-year life. The facility would be depreciated using straight-line depreciation. Gross income (GI) and annual operating costs (AOC) are expected to be $15000 and $4800 in year 1, respectively. GI and AOC are expected to increase by $600 per year for the next 6 years. The company's effective tax rate is 40% and it uses an after-tax MARR of 15%.After 7 years,the line is actually soldfor$30000.Is it worthwhile to invest?
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