The CFO of Acme Manufacturing is considering the purchase of a special diamond-tipped cutting tool. This tool has the following initial costs to put into service. Acme will use cash to pay for all of these expenses, some of which was borrowed on a long-term credit line with the local bank. The CFO has been directed by Acme to use the MACRS depreciation method with a GDS recovery period of 5 years. Assume the tool is sold in the fifth year for $22,000. Is this a good investment? Click the icon to view the additional data on the revenues, expenses, and interest rates. Click the icon to view the GDS Recovery Rates (rk). Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Complete the blank cells in the table below. (Round to the nearest dollar.) EOY BTCF, $ Depreciation, Taxable Income, Income Tax $ ATCF, $ $ (22%), $ 0 1 102,000 2 102,000 3 102,000 -5,368 -22,160 106,875 - 6,051 4 102,000 5 102,000 79,651 - 17,523 5 22,000 0 Purchase price Delivery charge $350,000 $7,000 Installation cost $19,000 Employee training $12,000 Increased annual revenue $136,000 Increased annual $34,000 expenses After-tax MARR 10% Effective tax rate 22% Sales price of the tool in $22,000 yr. 5 Projected salvage value in $12,000 yr. 5 Year 3-year a 3-year GDS Recovery Rates (rk) for the Six Personal Property Classes Recovery Period (and Property Class) a a a b 5-year 7-year 10-year 15-year 20-year b 1 0.3333 0.2000 0.1429 0.1000 0.0500 0.0375 2 0.4445 0.3200 0.2449 0.1800 0.0950 0.0722 3 0.1481 0.1920 0.1749 0.1440 0.0855 0.0668 4 0.0741 0.1152 0.1249 0.1152 0.0770 0.0618 5 0.1152 0.0893 0.0922 0.0693 0.0571 6 0.0576 0.0892 0.0737 0.0623 0.0528 7 0.0893 0.0655 0.0590 0.0489 8 0.0446 0.0655 0.0590 0.0452 9 0.0656 0.0591 0.0447 10 0.0655 0.0590 0.0447 11 0.0328 0.0591 0.0446 12 0.0590 0.0446 13 0.0591 0.0446 14 0.0590 0.0446 15 0.0591 0.0446 16 0.0295 0.0446 17 0.0446 18 0.0446 19 0.0446 20 0.0446 21 0.0223 a "These rates are determined by applying the 200% DB method (with switchover to the SL method) to the recovery period with the half-year convention applied to the first and last years. Rates for each period must sum to 1.0000. b These rates are determined with the 150% DB method instead of the 200% DB method (with switchover to the SL method) and are rounded off to four decimal places. Discrete Compounding; i=10% Single Payment Uniform Series Compound Present Compound Present Sinking Capital Amount Worth Fund Recovery Amount Worth Factor Factor Factor Factor Factor Factor To Find F To Find P To Find F To Find P To Find A To Find A Given P Given F Given A Given A Given F Given P N FIP PIF FIA PIA A/F AIP 1 1.1000 0.9091 1.0000 0.9091 1.0000 1.1000 2345 2 1.2100 0.8264 2.1000 1.7355 0.4762 0.5762 1.3310 0.7513 3.3100 2.4869 0.3021 0.4021 4 1.4641 0.6830 4.6410 3.1699 0.2155 0.3155 5 1.6105 0.6209 6.1051 3.7908 0.1638 0.2638 6 1.7716 0.5645 7.7156 4.3553 0.1296 0.2296 7 1.9487 0.5132 9.4872 4.8684 0.1054 0.2054 8 2.1436 0.4665 11.4359 9 2.3579 0.4241 10 2.5937 0.3855 13.5795 15.9374 5.3349 5.7590 0.0736 6.1446 0.0627 0.1627 0.0874 0.1874 0.1736