Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I need the solution in Excel. After-Tax EUAC Analysis (Restatement of Example 9-3 with Tax Information) The manager of a carpet manufacturing plant became concerned

I need the solution in Excel. image text in transcribed
image text in transcribed
After-Tax EUAC Analysis (Restatement of Example 9-3 with Tax Information) The manager of a carpet manufacturing plant became concerned about the operation of a critical pump in one of the processes. Afterdiscussing thissituation with the supervisor of plant engineering, they decided that a replacement study should be done and that a nine-year study period would be appropriate for this situation. The company that owns the plant is using an after-tax MARR of 6% per year for its capital investment projects. The effective income tax rate is 40% The existing pump, Pump A, including driving motor with integrated controls, cost $17,000 five years ago. The accounting records show the depreciation schedule to be following that of an asset with a MACRS (ADS) recovery period of nine years. Some reliability problems have been experienced with Pump A, including annual replacement of the impeller and bearings at a cost of $1,750. Annual expenses have been averaging $3,250. Annual insurance and property tax expenses are 2% of the initial capital investment. It appears that the pump will provide adequate service for another nine years if the present maintenance and repair practice is continued. An estimated MV of $750 could be obtained for the pump if it is sold now. It is estimated that, if this pump i continued in service, its final MV after nine more years will be about $200 An alternative to keeping the existing pump in service is to sell it immediately and to purchase a replacement pump, Pump B, for $16,000. A nine-year class life (MACRS five-year property class) would be applicable to the new pump under the GDS. An estimated MV at the end of the nine-year study period would be 20% of the initial capital investment. Operating and maintenance expenses for the new pump are estimated to be $3,000 per yea

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance

Authors: Harvey S Rosen

6th Edition

0072374055, 978-0072374056

More Books

Students also viewed these Finance questions

Question

f. How do you apply for the position?

Answered: 1 week ago

Question

b. Did you suppress any of your anger? Explain.

Answered: 1 week ago