Engineering Economics

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7) (35 points) A company is considering an investment in a new testing equipment to boost its revenue from contract jobs. For this new investment, the following data apply: Purchase price = $750,000 $300,000 from company funds and S450,000 from a loan Useful Life: 4 years Depreciation: MACRS-GDS 3-year property Estimated salvage: $75,000 Effective tax rate: 35% Estimated annual O&M costs: $40,000 Estimated annual increase in revenues: $300,000 Conditions on loan: Nominal annual rate of 5% per year compounded annually. The loan is to be repaid over 3 years with equal annual payments. a) (10 points) Loan calculations - principal and interest payments. (Round off values to the nearest dollar) b) (25 points) Find the ATCF for each year of this investment (Round off values to the nearest dollar). EOY BT&LCE Loan Loan Interest MACRS-GDS Taxable Income Tax ATCE Principal Payment Deduction Payment 0 1 2 3 4