A firm manufactures padded shipping bags. A cardboard carton should contain 100 bags, but machine operators fill the cardboard cartons by eye, so a carton may contain anywhere from 98 to 123 bags (average = 105.5 bags). Each padded bag costs $0.03. Management realizes that they are giving away of their output by overfilling the cartons. One solution is to automate the filling of shipping cartons. This should reduce the average quantity of bags per carton to 100.3, with almost no cartons containing fewer than 100 bags. The equipment would cost $18,600 and straight-line depreciation with a 10-year depreciable life and a $3600 salvage value would be used. The equipment costs $16,000 annually to operate. 200,000 cartons will be filled each year. This large profitable corporation has a 28% combined federal-plus-state incremental tax rate. Assume a 10-year study period for the analysis and an after-tax MARR of 15%.
A firm manufactures padded shipping bags. A cardboard carton
should contain 100 bags, but machine operators fill the cardboard
cartons by eye, so a carton may contain anywhere from 98 to 123
bags (average = 105.5 bags). Each padded bag costs $0.03.
Management realizes that they are giving away of their output
by overfilling the cartons. One solution is to automate the filling of
shipping cartons. This should reduce the average quantity of bags
per carton to 100.3, with almost no cartons containing fewer than
100 bags.
The equipment would cost $18,600 and straight-line depreciation
with a 10-year
used. The equipment costs $16,000 annually to operate. 200,000
cartons will be filled each year. This large profitable corporation has
a 28% combined federal-plus-state incremental tax rate. Assume a
10-year study period for the analysis and an after-tax MARR of
15%.
Compute:
(a) The after-tax present worth
(b) The after-tax
(c) The after-tax simple payback period
Please solve by hand and note the 28%. I am stuck on this, any help would be greatly appreciated!
Thank you in advance!
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