A subsidiary of AEP places in service electric generating and transmissionequipment at a cost of $3,000,000. It is expected to last 30 years with a salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4% each year thereafter. The subsidiary’s tax rate is 25% and the after-tax MARR is 9%. There is some concern that the need for this equipment will last only 10 years and will need to be sold off for $550,000 at that time. Develop tables using aspreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after only 10 years to see if the venture would be worthwhile economically. Solve, a. Use straight-line depreciation (no half-year convention). b. Use MACRS-GDS and state the appropriate property class. c. Use double declining balance depreciation (no half-year convention, no switching).
A subsidiary of AEP places in service electric generating and transmission
equipment at a cost of $3,000,000. It is expected to last 30 years with a salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4% each year thereafter. The subsidiary’s tax rate is 25% and the after-tax MARR is 9%. There is some concern that the need for this equipment will last only 10 years and will need to be sold off for $550,000 at that time. Develop tables using a
spreadsheet to determine the ATCF for each year and the after-tax PW, AW,
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