EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 8220101336736
Author: Park
Publisher: PEARSON
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Chapter 10, Problem 7P
To determine
Calculate the net cash flow.
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You have been asked to evaluate the profitability of building a new distribution center under the following conditions:I. The proposal is for a distribution center costing $1,500,000. The facility has an expected useful life of 35 years and a net salvage value (net proceeds from its sale after tax adjustments) of $225,000.II. Annual savings (due to a better strategic location) of $227,000 are expected, annual maintenance and administrative costs will be $114,000, and annual income taxes are $43,000. Suppose that the firm's MARR is 12%. Determine the net present worth of the investment.
It is being decided whether or not to replace an existing piece of equipment with a newer, more productive one that costs $80,000 and has an estimated MV of $20,000 at the end of its useful life of six years. Installation charges for the new equipment will amount to $3,000; this is not added to the capital investment but will be an expensed item during the first year of operation. MACRS (GDS) depreciation (five-year property class) will be used. The new equipment will reduce direct costs (labor, maintenance, rework, etc.) by $10,000 in the first year, and this amount is expected to increase by $500 each year thereafter during its six-year life. It is also known that the BV of the fully depreciated old machine is $0 butthat its present fair MV is $14,000. The MV of the old machine will be zero in six years. The effective income tax rate is 40%. Solve, a. Determine the prospective after-tax incremental cash flow associated with the new equipment if it is believed that the existing…
Taxes are costs, and, therefore, changes in tax rates can affect consumer prices, project lives, and the value of existing firms. Evaluate the change in taxation on the valuation of the following project:
Assumptions: Tax depreciation is straight-line over three years. Pre-tax salvage value is 25 in Year 3 and 50 if the asset is scrapped in Year 2. Tax on salvage value is 40% of the difference between salvage value and book value of the investment. The cost of capital is 20%.The table is attached
Please verify that the information above yields NPV = 0.
If you decide to terminate the project in Year 2, what would be the NPV of the project?
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Chapter 10 Solutions
EBK CONTEMPORARY ENGINEERING ECONOMICS
Ch. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
Ch. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Prob. 14PCh. 10 - Prob. 15PCh. 10 - Prob. 16PCh. 10 - Prob. 17PCh. 10 - Prob. 18PCh. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Prob. 29PCh. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 32PCh. 10 - Prob. 33PCh. 10 - Prob. 34PCh. 10 - Prob. 35PCh. 10 - Prob. 36PCh. 10 - Prob. 37PCh. 10 - Prob. 1STCh. 10 - Prob. 2STCh. 10 - Prob. 3STCh. 10 - Prob. 4STCh. 10 - Prob. 5ST
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