A firm manufactures padded shipping bags. A cardboard cartonshould contain 100 bags, but machine operators fill the cardboardcartons by eye, so a carton may contain anywhere from 98 to 123bags (average = 105.5 bags). Each padded bag costs $0.03.Management realizes that they are giving away of their outputby overfilling the cartons. One solution is to automate the filling ofshipping cartons. This should reduce the average quantity of bagsper carton to 100.3, with almost no cartons containing fewer than100 bags.The equipment would cost $18,600 and straight-line depreciationwith a 10-year depreciable life and a $3600 salvage value would beused. The equipment costs $16,000 annually to operate. 200,000cartons will be filled each year. This large profitable corporation hasa 28% combined federal-plus-state incremental tax rate. Assume a10-year study period for the analysis and an after-tax MARR of15%.Compute:(a) The after-tax present worth(b) The after-tax internal rate of return(c) The after-tax simple payback period A firm manufactures padded shipping bags. A cardboard cartonshould contain 100 bags, but machine operators fill the cardboardcartons by eye, so a carton may contain anywhere from 98 to 123bags (average = 105.5 bags). Each padded bag costs $0.03.Management realizes that they are giving away 5/2% of their outputby overfilling the cartons. One solution is to automate the filling ofshipping cartons. This should reduce the average quantity of bagsper carton to 100.3, with almost no cartons containing fewer than100 bags.The equipment would cost $18,600 and straight-line depreciationwith a 10-year depreciable life and a $3600 salvage value would beused. The equipment costs $16,000 annually to operate. 200,000cartons will be filled each year. This large profitable corporation hasa 28% combined federal-plus-state incremental tax rate. Assume a10-year study period for the analysis and an after-tax MARR of15%.Compute:(a) The after-tax present worth(b) The after-tax internal rate of return(c) The after-tax simple payback period

The internal rate of return (IRR) is a central part of capital planning and corporate money.…

Answered: A firm manufactures padded shipping…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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%.
Compute:
(a) The after-tax present worth
(b) The after-tax internal rate of return
(c) The after-tax simple payback period

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