Question
Henredon purchases a high-precision programmable router for shaping furniture components for $190,000. It is expected to last 12 years and have a salvage value of
Henredon purchases a high-precision programmable router for shaping furniture components for $190,000. It is expected to last 12 years and have a salvage value of $5,600. Henredon will borrow $100,000 at 13.6% over 6 years, paying only interest each year and paying all the principle in the sixth year. It will produce $48,000 in net revenue each year during its life. All dollar amounts are expressed in real dollars. Depreciation follows MACRS 7-year property, taxes are 25%, the real after-tax MARR is 10%, and inflation is 3.9%.
- Determine the actual after-tax cash flows for each year. ATCF0 = $enter a dollar amount ATCF1 = $enter a dollar amount ATCF2 = $enter a dollar amount ATCF3 = $enter a dollar amount ATCF4 = $enter a dollar amount ATCF5 = $enter a dollar amount ATCF6 = $enter a dollar amount ATCF7 = $enter a dollar amount ATCF8 = $enter a dollar amount ATCF9 = $enter a dollar amount ATCF10 = $enter a dollar amount ATCF11 = $enter a dollar amount ATCF12 = $enter a dollar amount
- Determine the PW of the after-tax cash flows. PW$T = $enter a dollar amount
- Determine the AW of the after-tax cash flows. AW$T = $enter a dollar amount
- Determine the FW of the after-tax cash flows. FW$T = $enter a dollar amount
- Determine the combined IRR of the after-tax cash flows. IRRc = enter percentages %
- Determine the combined ERR of the after-tax cash flows. ERRc = enter percentages %
- Determine the real IRR of the after-tax cash flows. IRRr = enter percentages %
- Determine the real ERR of the after-tax cash flows. ERRr = enter percentages %
Parts a-d: Round your answer to 2 decimal places. The tolerance is 5. Parts e-h: Round your answer to 2 decimal places and present in percentage format. The tolerance is 0.1.
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