You are considering buying an industrial equipment whose price is 330000. The equipment is expected to earn an annual revenue of $125,000 The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR = 15%. c) Annual equivalent cash flow company MARR = 15%. d) IRR of the project.
You are considering buying an industrial equipment whose price is 330000. The equipment is expected to earn an annual revenue of $125,000 The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR = 15%. c) Annual equivalent cash flow company MARR = 15%. d) IRR of the project.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:You are considering buying an industrial
equipment whose price is 330000. The
equipment is expected to earn an annual
revenue of $125,000 The
equipment will be depreciated under MACRS as
a five-year recovery property. The equipment
will be used for seven years, at the end of which
time, you can sell it for $50,000. Your company's
marginal tax rate is 35% over the project period.
Perform the following:
a) Determine the net after-tax cash flows for
each period over the project life.
b) Net present worth assuming company MARR
= 15%.
c) Annual equivalent cash flow company MARR
= 15%.
d) IRR of the project.
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