You need to know whether the building of a new warehouse is justified under the following conditions. ◼◼ The proposal is for a warehouse costing $250,000. ◼◼ The warehouse has an expected useful life of 35 years and a net salvage value (net proceeds from sale after tax adjustments) of $50,000. ◼◼ Annual receipts of $67,000 are expected, annual maintenance and administrative costs will be $12,000/year, and annual income taxes are $15,000. Given the foregoing data, which of the following statements are correct? (a) The proposal is justified for a MARR of 15%. (b) The proposal has a net present worth of -$50,254 when 20% is used as the interest rate. (c) The proposal is acceptable, as long as MARR … 15.93%. (d) All of the preceding are correct.
You need to know whether the building of
a new warehouse is justified under the following
conditions.
◼◼ The proposal is for a warehouse costing $250,000.
◼◼ The warehouse has an expected useful life of
35 years and a net salvage value (net proceeds
from sale after tax adjustments) of $50,000.
◼◼ Annual receipts of $67,000 are expected, annual
maintenance and administrative costs will be
$12,000/year, and annual income taxes are
$15,000.
Given the foregoing data, which of the following
statements are correct?
(a) The proposal is justified for a MARR of 15%.
(b) The proposal has a net present worth of
-$50,254 when 20% is used as the interest rate.
(c) The proposal is acceptable, as long as
MARR … 15.93%.
(d) All of the preceding are correct.
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