Petrofield Bhd is considering to replace a steam turbine drive. This equipment has a present MV of RM100,000 and a BV of RM50,000. It has five more years of depreciation available under MACRS (ADS) of RM13,000 per year for four years and RM20,000 in year five. (The original recovery period was nine years.) The estimated MV of the equipment five years from now is RM70,000. The total annual operating and maintenance expenses are averaging RM50,000 per year. New steam turbine drive would then be leased. Estimated annual operating expenses for the new equipment are RM45,000 per year. The annual leasing costs would be RM30,000. The MARR (after taxes) is 12% per year, t= 40%, and the analysis period is five years.(Remember: The owner claims depreciation, and the leasing cost is an operating expense). Based on an after-tax analysis, should the new equipment be leased? Base your answer on the IRR of the incremental cash flow. ANSWER: CASHFLOW TABLE FOR DEFENDER (2M) (Put in Pdf) CASHFLOW TABLE FOR CHALLENGER (2M) (Put in Pdf NEW CASHFLOW FOR DEFENDER-CHALLENGER (1M) (Put in Pdf) PW(129) (DEFENDER-CHALLENGER)= PW (9%) (DEFENDER-CHALLENGER) = IRR = % Conclusion/justification: EE2332 Chapte....ppt 8 BEE2332 Chapte....ppt 8_BEE2332 Chapte....pdf Petrofield Bhd is considering to replace a steam turbine drive. This equipment has a present MV of RM100,000 and a BV of RM50,000. It has five more years of depreciation available under MACRS (ADS) of RM13,000 per year for four years and RM20,000 in year five. (The original recovery period was nine years.) The estimated MV of the equipment five years from now is RM70,000. The total annual operating and maintenance expenses are averaging RM50,000 per year. New steam turbine drive would then be leased. Estimated annual operating expenses for the new equipment are RM45,000 per year. The annual leasing costs would be RM30,000. The MARR (after taxes) is 12% per year, t= 40%, and the analysis period is five years.(Remember: The owner claims depreciation, and the leasing cost is an operating expense). Based on an after-tax analysis, should the new equipment be leased? Base your answer on the IRR of the incremental cash flow. ANSWER: CASHFLOW TABLE FOR DEFENDER (2M) (Put in Pdf) CASHFLOW TABLE FOR CHALLENGER (2M) (Put in Pdf NEW CASHFLOW FOR DEFENDER-CHALLENGER (1M) (Put in Pdf) PW(129) (DEFENDER-CHALLENGER)= PW (9%) (DEFENDER-CHALLENGER) = IRR = % Conclusion/justification: EE2332 Chapte....ppt 8 BEE2332 Chapte....ppt 8_BEE2332 Chapte....pdf