An injection molding machine can be purchased and installed for $120,000. It is in the seven-year GDS property class and is expected to be kept in service for eight years. It is believed that $12,000 can be obtained when the machine is disposed of at the end of year eight. The net annual value added (i.e., revenues less expenses) that can be attributed to this machine is constant over eight years and amounts to $15,000. An effective income tax rate of 28% is used by the company, and the after-tax MARR equals 15% per year. a. What is the approximate value of the company's before-tax MARR? The before-tax MARR is 14 %. (Round to the nearest whole number.) b. Determine the GDS depreciation amounts in years one through eight. (Round to the nearest dollar.) Year 1 2 3 4 Depreciation, $ 10003 17143 12243 8743 6251 6244 6251 3122 5 6 6 7 8 c. What is the taxable income at the end of year eight that is related to capital investment? The taxable income at the end of year eight is $ 8,000). (Round to the nearest dollar.) d. Set up a table and calculate the ATCF for this machine. (Round to the nearest dollar.) 0 Depreciation, $ TI, $ T(29%), $ PW(10%), $ - 70,000 10,383 11,150 1 2 3 BTCF, $ - 70,000 12000 12000 12000 12,000 12,000 12,000 12,000 10003 17143 12,243 8,743 6,251 6,244 6,251 3.122 1997 -5143 -243 3,257 5,749 5,756 4 ATCF, $ - 70,000 11421 13,491 12,070 11,055 10,333 10,331 10,333 9,425 5,680 - 579 1491 70 -945 - 1,667 - 1,669 - 1,667 - 2,575 -2,320 9,068 7,551 6,416 5 6 5,832 5,302 7 5,749 8 8,878 12,000 8,000 4,397 2,650 8 8,000 PW(10%) of ATCF = -7,251 e. Should a recommendation be made to purchase the machine? The project should be rejected GDS Recovery Rates () Year 7-year Property Class 1 0.1429 2 0.2449 3 0.1749 4 0.1249 5 0.0893 6 0.0892 7 0.0893 8 0.0446 An injection molding machine can be purchased and installed for $120,000. It is in the seven-year GDS property class and is expected to be kept in service for eight years. It is believed that $12,000 can be obtained when the machine is disposed of at the end of year eight. The net annual value added (i.e., revenues less expenses) that can be attributed to this machine is constant over eight years and amounts to $15,000. An effective income tax rate of 28% is used by the company, and the after-tax MARR equals 15% per year. a. What is the approximate value of the company's before-tax MARR? The before-tax MARR is 14 %. (Round to the nearest whole number.) b. Determine the GDS depreciation amounts in years one through eight. (Round to the nearest dollar.) Year 1 2 3 4 Depreciation, $ 10003 17143 12243 8743 6251 6244 6251 3122 5 6 6 7 8 c. What is the taxable income at the end of year eight that is related to capital investment? The taxable income at the end of year eight is $ 8,000). (Round to the nearest dollar.) d. Set up a table and calculate the ATCF for this machine. (Round to the nearest dollar.) 0 Depreciation, $ TI, $ T(29%), $ PW(10%), $ - 70,000 10,383 11,150 1 2 3 BTCF, $ - 70,000 12000 12000 12000 12,000 12,000 12,000 12,000 10003 17143 12,243 8,743 6,251 6,244 6,251 3.122 1997 -5143 -243 3,257 5,749 5,756 4 ATCF, $ - 70,000 11421 13,491 12,070 11,055 10,333 10,331 10,333 9,425 5,680 - 579 1491 70 -945 - 1,667 - 1,669 - 1,667 - 2,575 -2,320 9,068 7,551 6,416 5 6 5,832 5,302 7 5,749 8 8,878 12,000 8,000 4,397 2,650 8 8,000 PW(10%) of ATCF = -7,251 e. Should a recommendation be made to purchase the machine? The project should be rejected GDS Recovery Rates () Year 7-year Property Class 1 0.1429 2 0.2449 3 0.1749 4 0.1249 5 0.0893 6 0.0892 7 0.0893 8 0.0446