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A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen Design B Design A $910,000 $900,000 $260,000 Capital investment $2,070,000 $1,180,000 $340,000 MV at end of useful life Annual revenues less expenses MACRS property class 5 years 5 years 6 years Useful life 7 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the Aw value for the Design A. AWA(11%) = $ 127,956' (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.

A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen Design B Design A $910,000 $900,000 $260,000 Capital investment $2,070,000 $1,180,000 $340,000 MV at end of useful life Annual revenues less expenses MACRS property class 5 years 5 years 6 years Useful life 7 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the Aw value for the Design A. AWA(11%) = $ 127,956' (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.

ENGR.ECONOMIC ANALYSIS
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 must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen? Design A $910,000 $900,000 $260,000 Design B Capital investment $2,070,000 MV at end of useful life $1,180.000 Annual revenues less expenses $340,000 MACRS property class 5 years 7 years 5 years Useful life 6 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the AW value for the Design A. AWA (11%) = $ 127,956 (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.
Transcribed Image Text:A firm must decide between two designs. Their effective income tax rate is 15%, and MACRS depreciation is used. If the desired after-tax return on investment is 11% per year, which design should be chosen? Design A $910,000 $900,000 $260,000 Design B Capital investment $2,070,000 MV at end of useful life $1,180.000 Annual revenues less expenses $340,000 MACRS property class 5 years 7 years 5 years Useful life 6 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Calculate the AW value for the Design A. AWA (11%) = $ 127,956 (Round to the nearest dollar.) Calculate the AW value for the Design B. AWB (11%) = $ - 18,121 (Round to the nearest dollar.) Based on the AW values, Design A should be chosen.
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