Arroy Snackfoods Old New Cost 75,000 215,000 Salvage for Depreciation Current Salvage Value 40,000 215,000 Actual Expected Salvage 30,000 New Old Difference 43,000 7,500 35,500 61,300 33,780 Remaining Depreciation Schedules Year 1 Year 2 Year 3 Year 4 Year 5 68,800 41,280 24,768 24,768 7,500 7,500 7,500 7,500 17,268 17,268 Original Life Remaining Life 10 5 5 5 Depreciation Method Straight-lin MACRS Depreciable Life 10 5 TCF Calculation New Old Current Book Value 37,500 215,000 Salvage Energy Savings Salary Savings 6,000 68,000 Book Taxable Tax Rate WACC 25% 9.5% Taxes After-Tax Salvage Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Expenses Depreciation (74,000 35,500 61,300 33,780 17,268 17,268 Pre-Tax Operating Income Taxes Add: Depreciation After-tax Operating Cash Flow Terminal Cash Flow Total After-tax Cash Flow Payback Period Discounted Payback Period Net Present Value Internal Rate of Return Modified Internal Rate of Return (175,625) 12,384 TABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 2 44.45 32.00 24.49 18.00 9.50 7.219 14.81 19.20 17.49 14.40 8.55 6.677 7.41 11.52 12.49 11.52 7.70 6.177 11.52 8.93 9.22 6.93 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55 5.90 4.888 4.46 6.55 5.90 4.522 9 10 11 12 13 14 15 16 6.56 5.91 4.462 6.55 5.90 4.461 3.28 5.91 5.90 4.461 5.91 4.462 5.90 4.461 5.91 4.462 2.95 4.461 4.462 18 4.461 19 4.462 4.461 21 2321