Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Michelin Tire Company is considering a new autoclave as part of the valcanizing process for tire production. The autoclave can be purchased and installed

image text in transcribed
image text in transcribed
The Michelin Tire Company is considering a new autoclave as part of the valcanizing process for tire production. The autoclave can be purchased and installed for $2.25 million and will have a salvage value of $400,000 at the end of its useful life at 8 years. Its use will create an opportunity to increase sales by $850,000 per year and will have operating expenses of $225,000 per year. Corporate income tax rates are calculated to be 40%. After careful consideration, you decide to use a 5-yr Modified Accelerated Cost Recovery System (MACRS) depreciation schedule. You have decided to use a Minimum Attractive Rate of Return (MARR) of 10%. Based on the above information use the spreadsheet provided below to fill in the missing blanks (in yellow) for ATCF. BTCF. DWO, TI. T. ATCF. and MACRS (5); information use the spreadsheet provided below to fill in the missing blanks (in yellow) for ATCF. BTCF. DWO. TIT. ATCF. and MACRS (5) Year BTCF OWO TI ATCE MACRS 15) 0 -$2,250,000 1 3625,000 $175,000 $70,000 20 00 2 $720,000 -$30,000 5063,000 $625,000 $432,000 $77,200 19.20% $625,000 $365,800 $146,320 11.52% $625,000 $250,200 1478,680 11.52% $625,000 $129,600 5.76% $625,000 $0.00 $625,000 $0.00 $410,000 MARRAY 10% PWA $558 493 IRRAT 16.57% The Michelin Tire Company is considering a new autoclave as part of the valcanizing process for tire production. The autoclave can be purchased and installed for $2.25 million and will have a salvage value of $400,000 at the end of its useful life at 8 years. Its use will create an opportunity to increase sales by $850,000 per year and will have operating expenses of $225,000 per year. Corporate income tax rates are calculated to be 40%. After careful consideration, you decide to use a 5-yr Modified Accelerated Cost Recovery System (MACRS) depreciation schedule. You have decided to use a Minimum Attractive Rate of Return (MARR) of 10%. Based on the above information use the spreadsheet provided below to fill in the missing blanks (in yellow) for ATCF. BTCF. DWO, TI. T. ATCF. and MACRS (5); information use the spreadsheet provided below to fill in the missing blanks (in yellow) for ATCF. BTCF. DWO. TIT. ATCF. and MACRS (5) Year BTCF OWO TI ATCE MACRS 15) 0 -$2,250,000 1 3625,000 $175,000 $70,000 20 00 2 $720,000 -$30,000 5063,000 $625,000 $432,000 $77,200 19.20% $625,000 $365,800 $146,320 11.52% $625,000 $250,200 1478,680 11.52% $625,000 $129,600 5.76% $625,000 $0.00 $625,000 $0.00 $410,000 MARRAY 10% PWA $558 493 IRRAT 16.57%

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

Making Auditors Effective Theory Evidence Perspectives

Authors: Mark Schelker

1st Edition

3832934375, 978-3832934378

More Books

Students also viewed these Accounting questions

Question

What lessons in intervention design, does this case represent?

Answered: 1 week ago