Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost $13.2 million and is expected to generate an income of $7.5 million the first year (growing $1M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or ...years?
Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost $13.2 million and is expected to generate an income of $7.5 million the first year (growing $1M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or ...years?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...
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