Question
Assume you have been hired to evaluate an investment required by EPA for a waste management system for a nearby hog operation. The system will
Assume you have been hired to evaluate an investment required by EPA for a waste management system for a nearby hog operation. The system will cost $350,000 and will last 30 years but only depreciated for 10 years. Assuming straight line depreciation, the salvage value is zero fro depreciation. The actual expected terminal value is %50,000 which will be received in 30 years time. The system has a $3,250 annual maintenance cost. The marginal tax rate is 28% and the after-tax cost of capital is 8.25%. The production of hog will require feed at $23,000 per year and the operation will produce $60,000 in income each year. What is the annualized capital recovery cost in pre-tax terms for this $300,000 investment?
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