Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Amy, a newly graduated restaurant owner, is interested in establishing a family-owned catering business focused on gourmet food options. To supplement the equipment you already
Amy, a newly graduated restaurant owner, is interested in establishing a family-owned catering business focused on gourmet food options. To supplement the equipment you already have, you need to purchase a commercial refrigerator that costs $ 20,000 and is classified for depreciation purposes as a 3-year MACRS property. The asset is estimated to have a resale value at the end of its six-year useful life of $ 3,000. Operational and maintenance expenses are expected to be $ 1,500 the first year and will increase $ 300 annually from the second year. Uniform annual income of $ 10,000 is expected. In addition, to acquire this alternative, she needs to make a loan of $ 10,000 that will be repaid in four years according to the amortization schedule shown in the table. ACUM. FINAL TOTAL ANNUAL BALANCE INTEREST ACUM. PAYMENT 7% BALANCE 10,000 10,000 700.00 10,700 $2,952.28 $7,747.72 7,748 542.34 8,290 $2,952.28 $5,337.78 5,338 373.64 5,711 $2,952.28 $2,759.14 2,759 193.14 2,952 $2,952.28 $0.00 Generate the table detailing the after-tax analysis of this investment alternative. Apply an effective tax rate of 30%. You must show your calculations in detail to get credit. After completing your analysis, briefly explain what measure of merit (decision criteria) you would use to explain to the chef if this is a good investment. Write a sentence with your recommendation. Assume a 15% MARR after tax
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