A startup is considering buying a $295,000 piece of equipment. If it purchases the equipment, it will take a loan for the entire amount; the interest on the loan is 2%, and the loan will be repaid in 5 equal end of year payments. The startup estimates that the equipment would generate an additional $170,000 of revenue each year. At the end of 5 years, the equipment would have a salvage value of $21,000. The tax rate is 24%. Assuming a planning horizon of 5 years, that the equipment is depreciated using MACRS (3-year property class), and that the medical practice uses an after-tax MARR of 9%, compute the PW and determine whether the startup should invest in the equipment. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±10. Should the startup invest in the new equipment?

A startup is considering buying a $295,000 piece of equipment. If it purchases the equipment, it will take a loan for the entire amount; the interest on the loan is 2%, and the loan will be repaid in 5 equal end of year payments. The startup estimates that the equipment would generate an additional $170,000 of revenue each year. At the end of 5 years, the equipment would have a salvage value of $21,000. The tax rate is 24%. Assuming a planning horizon of 5 years, that the equipment is depreciated using MACRS (3-year property class), and that the medical practice uses an after-tax MARR of 9%, compute the PW and determine whether the startup should invest in the equipment. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±10. Should the startup invest in the new equipment?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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