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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 $5,800. Henredon will borrow $100,000 at 13.8% over 6 years, paying only interest each year and paying all the principle in the sixth year. It will produce $49,000 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%. a. Determine the actual after-tax cash flows for each year. ATCFo= $ ATCF 1 = $ ATCF2 = $ ATCF3 = $ ATCF4 = $ ATCFs $ ATCF - $ ATCF7 = $ ATCF8 = $ ATCF, = $ ATCF 10 = $ ATCF11 = $ ATCF 12 = $ b. Determine the PW of the after-tax cash flows. PWST = $ c. Determine the AW of the after-tax cash flows. AWST = $ d. Determine the FW of the after-tax cash flows. FWST = $ e. Determine the combined IRR of the after-tax cash flows. IRR- % f. Determine the combined ERR of the after-tax cash flows. ERR = % g. Determine the real IRR of the after-tax cash flows. IRR = h. Determine the real ERR of the after-tax cash flows. ERR,= %
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