Engineering Economics

Last fiscal year 01-Jan to 31-Dec, Norco, Inc., had a gross revenue of $20, 000, 000, cost of goods sold and interest expenses of $5, 000, 000, and total depreciation charges of $5, 000, 000. Also on October 1 of last year, Norco completed purchase of and placed in service a new automated production line with an installed initial cost of $2, 000, 000. Compute Norco's taxable income for last year. Consider the following two alternatives. Each alternative has a 10-year useful life and no salvage value. If the combined tax rate is 35%, calculate the annual straight-line depreciation and annual combined taxes for each alternative? If the MARR is 10%, which alternative is preferred? Answer in terms of incremental rate of return analysis Cash FlowAB B-A Initial cost $6, 000$9, 000 - $3, 000 Annual Operating Revenue$2, 000$3, 000 $1, 000 Annual Operating Expenses - $1, 000- $1, 500 - $500 Straight-line Depreciation Annual Combined Taxes