Problem 3: (25 points) Westmed is building a new facility in Arizona for manufacturing medical equipment. The new building is expected to cost $2.75 million. You can assume the facility will be open in January. Non-residential buildings depreciate over 39 years at 2.564% each year using straight line depreciation. The equipment (which depreciates follow the MACRS table of a 3-year property, table at the end of document) will cost $1.55 million plus installation and start-up costs of $135,000. Maintenance is expected to be $1.3 million in the first year and increase 6% annually. In Arizona manufacturing facilities pay a flat state tax rate of 12%. Westmed will also have to pay federal taxes following the corporate income tax rate table below. The expected revenue of sales from products manufactured in the new facility are shown in the table below. What is the net present worth of the after-tax cash flows for the first 5 years of the facility using an MARR of 15%? Taxable Income $0 - $50,000 $50,001 - $75,000 $75,001 - $100,000 $100,001 - $385,000 $395,001 - $10 Million $10 Million - $15 Million >$15 Million 3 Tax Rate 15% 25% 4% 39% 34% 35% Year 11 2 3 Income Sales $2,100,000 $3,200,000 $3,800,000 $1,500,000 $5,300,000 Here are the specific parts we will look for when grading. This should also help you to include all of the parts of the problem. Formatting Tables: Is easy to follow your spread sheet? The TA should be able to look at your sheet and by column titles and formulas in the cells understand what you did. Depreciation (building and equipment) BTCF State Tax Federal Tax ATCF PV of ATCF