An industrial organization has established an automated assembly line (for $360,000) that will reducelabor costs by $56,000 each year for 10 years. The Internal Revenue Service has ruled that you mustdepreciate the assembly line on a Straight Line (SL) basis with a depreciable life of 10 years. After-taxMARR is 10% per year. The effective income tax rate is 25%. After 10 years, the machine will have zerosalvage value. a) Draw a table showing Before Tax Cash Flow (BTCF) and After-Tax Cash Flow (ATCF). b)Calculate the after-tax PW and IRR. (Use interpolation method to find IRR). Is it feasible?

The automated assembly line is a profitable investment for the industrial organization, with a…

Answered: An industrial organization has…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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