Question
Consider; 1. A company is considering the installation of a new machine that costs $150,000. The machine is expected generate new income of $52,000 per
Consider;
1. A company is considering the installation of a new machine that costs $150,000. The machine is expected generate new income of $52,000 per year for the next five years, with operating expenses averaging $10,000 per year. Using SL depreciation, $0 salvage value, and an effective income tax rate of 26%; determine the after-tax rate of return for this investment. If the company's after-tax MARR rate is 8%, would this be a good investment or not?
2. Your company bought some new manufacturing equipment for $200,000, which generated new income averaging $50,000 per year. The operating costs averaged $8,000 per year. The equipment was subjected to MACRS depreciation, with a 7-year recovery period and no salvage value. However, the equipment was kept in service for a total of 10 years, and was sold for $10,000 after the ten years of service. The company uses an after-tax MARR rate of 6% per year and has an effective tax rate of 28%. Determine the after-tax net present worth of the equipment over the 10-year period. (Answer is 76260)
3. Your company bought an extruder for $350,000; which generated new income of $95,000 per year. The extruder's operating costs averaged $12,000 per year. The extruder was depreciated using the MACRS method, with a recovery period of 7 years and zero salvage value. However, it was sold for $100,000 after five years of service. The company uses an after-tax MARR rate of 5% per year and has an effective tax rate of 30%. Determine the extruder's after-tax net present worth over the 5-year period.
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