The Numbers

State tax rate: $5\%$

Fed Rate : $25\%$

Assumptions

The salvage value will be realized at the end of the year.

Repeatability of option $1.$

Ignore property classes.

Questions

Determine the company's effective tax rate. $(10$ points$)$

For BTCF $($Before tax cash flow$)$

a$.$ PW $(10$ points$)$

b$.$ AW $(10$ points$)$

c$.$ IRR $(10$ points$)$

For ATCF

a$.$ PW $(10$ points$)$

b$.$ AW $(10$ points$)$

c$.$ IRR $(10$ points$)$

d$.$ EVA $(10$ points$)$

For option $1,$ what is the impact if the useful life goes from $5$ years to $8$ years?

a$.$ ATCF

i$.$ PW $(10$ points$)$

ii$.$ AW $(10$ points$)$

iii. IRR $(10$ points$)$

iv$.$ EVA $(10$ points$)$

Based off the ATCF for the $3$ scenarios which investment$($s$),$ if any, should be chosen, and why?

$(40$ points$)$