Certain new machinery, when placed in service, is estimated to cost $180,000. It is expected to reduce net annual operating expenses by $36,000 per year for 10 years and to have a $30,000 MV at the end of the 10th year. 

Solve

(a) Develop the ATCFs and BTCFs. 

(b) Calculate the before-tax and after-tax IRR. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 6%. State income taxes are deductible from federal taxable income. This machinery is in the MACRS (GDS) five-year property class. 

(c) Calculate the after-tax PW when the after-tax MARR = 10% per year. In this example, the study period is 10 years, but the property class of the machinery is 5 years. Solve by hand and by spreadsheet (show the complete cash-flow diagram.)