A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 24%, and MACR depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design A $1,140,000 $960,000 Design B $1,810,000 $1,110,000 Capital investment MV at end of useful life Annual revenues less $250,000 $370,000 expenses 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. ..... Calculate the AW value for the Design A. AWA(12%) = S (Round to the nearest dollar.) Calculate the AW value for the Design B. AWg(12%) = S (Round to the nearest dollar.) Based on the AW values, should be chosen.
A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 24%, and MACR depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design A $1,140,000 $960,000 Design B $1,810,000 $1,110,000 Capital investment MV at end of useful life Annual revenues less $250,000 $370,000 expenses 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. ..... Calculate the AW value for the Design A. AWA(12%) = S (Round to the nearest dollar.) Calculate the AW value for the Design B. AWg(12%) = S (Round to the nearest dollar.) Based on the AW values, should be chosen.
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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Transcribed Image Text:A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 24%, and MACRS
depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen?
Design A
Design B
$1,140,000
$960,000
$1,810,000
$1,110,000
Capital investment
MV at end of useful life
Annual revenues less
$250,000
$370,000
expenses
5 years
7 years
5 years
6 years
MACRS property class
Useful life
Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class.
.....
Calculate the AW value for the Design A.
AWA(12%) = $|
(Round to the nearest dollar.)
Calculate the AW value for the Design B.
AWR(12%) = S
(Round to the nearest dollar.)
Based on the AW values,
should be chosen.
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