5. A firm must decide between two designs A and B. Their effective income rate is 50%. If the desired after-tax return on investment is 8% per year, which alternative should be chosen? *Use repeatability assumption and AW method. Detail analysis is required* F 1 B Capital investment 40000 MV at end of useful life 4000 Annual expenses 2500 Depreciation method MACRS (GDS) With 5- year recovery period Useful life (in years) 8 A 30000 6000 3000 SL to zero book value over 5 years 6
5. A firm must decide between two designs A and B. Their effective income rate is 50%. If the desired after-tax return on investment is 8% per year, which alternative should be chosen? *Use repeatability assumption and AW method. Detail analysis is required* F 1 B Capital investment 40000 MV at end of useful life 4000 Annual expenses 2500 Depreciation method MACRS (GDS) With 5- year recovery period Useful life (in years) 8 A 30000 6000 3000 SL to zero book value over 5 years 6
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm must decide between two designs A and B. Their effective income rate is 50%. If the desired after-tax
Transcribed Image Text:5.
A firm must decide between two designs A and B. Their effective income rate is 50%. If the desired
after-tax return on investment is 8% per year, which alternative should be chosen? *Use repeatability
assumption and AW method. Detail analysis is required* *
1
B
Capital investment
40000
MV at end of useful life
4000
Annual expenses
2500
Depreciation method
MACRS (GDS) With 5-
year recovery period
Useful life (in years)
8
A
30000
6000
3000
SL to zero book value over
5 years
6
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