7 A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen?Design ADesign B$910,000$900,000$260,000$2,070,000$1,180,000$340,0005 yearsCapital investmentMV at end of useful lifeAnnual revenues less expensesMACRS property class5 years7 yearsUseful life6 yearsClick the icon to view the GDS Recovery Rates (rı) for the 5-year property class.Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year.Calculate the AW value for the Design A.AWA (11%) = $ 127,956 (Round to the nearest dollar.)%3DCalculate the AW value for the Design B.AWB (11%) = $ – 18,121 (Round to the nearest dollar.)Based on the AW values, Design A should be chosen.

Annual worth or AW is referred to as the easy way of understanding the annual amount, for instance,…

A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen? Design A Design B Capital investment $910,000 $2,070,000 MV at end of useful life $900,000 $1,180,000 Annual revenues less expenses $260,000 $340,000 MACRS property class Useful life 5 years 7 years 5 years 6 years Click the icon to view the GDS Recovery Rates (r) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the AW value for the Design A. AWA (11%) = $ 127,956 (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.

A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen? Design A Design B Capital investment $910,000 $2,070,000 MV at end of useful life $900,000 $1,180,000 Annual revenues less expenses $260,000 $340,000 MACRS property class Useful life 5 years 7 years 5 years 6 years Click the icon to view the GDS Recovery Rates (r) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the AW value for the Design A. AWA (11%) = $ 127,956 (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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