Exercise HW

A company is trying to purchase a certain equipment for $100,000 that will have a market value of $12,000 on disposal at year 5. This equipment will have an output of 10,000 units annually and each unit will be sold for $5, total expenses will be $2.8 per unit.

Before tax MARR is 20%, effective income tax is 30%

Use MACRS-GDS half year convention (equipment is in the 5 years property).

Calculate the present worth of the ATCF. Is this still a good investment after tax?