a) You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment $345,000; market value at end of year six = $120,000; annual revenues $120,000; annual expenses $8,000; equipment life 6 years; effective income tax rate = 50%; and after-tax MARR depreciation will be used with a five-year recovery period. 10% per year. MACRS %3D b) Compute the PW of the equipment's ATCFS. Is your answer in Part (a) the same as your answer in Part (b)?

a) You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment $345,000; market value at end of year six = $120,000; annual revenues $120,000; annual expenses $8,000; equipment life 6 years; effective income tax rate = 50%; and after-tax MARR depreciation will be used with a five-year recovery period. 10% per year. MACRS %3D b) Compute the PW of the equipment's ATCFS. Is your answer in Part (a) the same as your answer in Part (b)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

2)
AMT, Inc., is considering the purchase of a digital camera for maintenance of design
specifications by feeding digital pictures directly into an engineering workstation where
computer-aided design files can be superimposed over the digital pictures. Differences between
the two images can be noted, and corrections, as appropriate, can then be made by design
engineers.
a) You have been asked by management to determine the PW of the EVA of this equipment,
assuming the following estimates: capital investment = $345,000; market value at end of year
six = $120,000; annual revenues = $120,000; annual expenses $8,000; equipment life 6
years; effective income tax rate 50%; and after-tax MARR = 10% per year. MACRS
depreciation will be used with a five-year recovery period.
b) Compute the PW of the equipment's ATCFS. Is your answer in Part (a) the same as your
answer in Part (b)?
1

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Please show as much working as possible. Thank you for your help.
A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 12-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Choose Numerator: Annual after-tax net income $ 1 23,000 / Accounting Rate of Return Choose Denominator: Annual average investment $ = 360,000 = Insert