A special purpose machine tool set would cost $20,000. The tool set will befinanced by a $10,000 bank loan repayable in two equal annual installments at 10% compounded annually. The tool is expected to provide annual savings (material) of $30,000 for two years and is to be depreciated by the three-year MACRS method. This special machine tool will require annual O&M costs in the amount of $5,000. The salvage value at the end of two years is expected to be $8,000. Suppose that it is expected a 6% annual inflation during the project period. Assuming a marginal tax rate of 40% and an MARR of 20% (inflation adjusted), what is the net present worth of this project?(a) $16,301(b) $24,558(c) $23,607(d) $18,562
A special purpose machine tool set would cost $20,000. The tool set will be
financed by a $10,000 bank loan repayable in two equal annual installments at 10% compounded annually. The tool is expected to provide annual savings (material) of $30,000 for two years and is to be
(a) $16,301
(b) $24,558
(c) $23,607
(d) $18,562
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
