A small print shop is investing in new printing equipment that will cost $33,000. They estimate that they will gain of $11,000 peryear in additional revenues for each of the next 6 years. At the end of 6 years, the equipment will have a salvage value of $3.,500.Assuming a tax rate of 22%, a MACRS 5-year property class, 50% bonus depreciation, and an after-tax MARR of 8%, compute thepresent worth of the printing equipment and determine whether or not the print shop should invest in it.Click here to access the TVM Factor Table calculator.Click here to access the MACRS-GDS Property Classes.Click here to access the MACRS-GDS percentages page.Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is +10.Should the print shop invest in the printing equipment?

A. The after-tax present worth of the drone = PV of after-tax Cash inflows + PV of Tax benefit of…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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Question

A small print shop is investing in new printing equipment that will cost $33,000. They estimate that they will gain of $11,000 per
year in additional revenues for each of the next 6 years. At the end of 6 years, the equipment will have a salvage value of $3.,500.
Assuming a tax rate of 22%, a MACRS 5-year property class, 50% bonus depreciation, and an after-tax MARR of 8%, compute the
present worth of the printing equipment and determine whether or not the print shop should invest in it.
Click here to access the TVM Factor Table calculator.
Click here to access the MACRS-GDS Property Classes.
Click here to access the MACRS-GDS percentages page.
Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.
Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is +10.
Should the print shop invest in the printing equipment?

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