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…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

7
Hyundai USA has numerous robotic welders as well as robotic checkers with vision. One underbody robotic welder costing $1,200,000 (7-year property class) was installed and is increasing productivity by 2.5% in one area. The result is a savings of $500,000 per year. Deductible expenses other than depreciation and interest associated with the installed robotic welder are only $120,000. Hyundai borrowed $550,000 at 11% for 5 years. They plan to keep the welder for 8 years. Hyundai’s income-tax rate is 25% and their MARR is 9% after taxes. Determine the PW, IRR, for the investment if: The loan is paid back using Plan 3 Plan 3—make equal principal-plus-interest end-of-period payments.
Small railcar manufacturing machinery had an $180,000 initial cost and a $30,000 projected salvage value after five years of use. In year 2, the revenue was $620,000, and the operating costs were $98,000. What would the difference in taxes paid in year 2 be if the depreciation method was straight line rather than MACRS if the company's effective tax rate was 36%? Year 2's MACRS depreciation rate is 32%.
Weber Drilling Company is considering investing $20M in oil and gas drilling equipment. It is expected that this will improve the firms labor costs by $8M/yr. Assume the firm pays a 35% income tax rate on its taxable income and uses the MACRS depreciation method. Determine the after-tax cash flow from the investment (in a tabular format) and advise with the firm's after- tax hurdle rate (MARR) of 15%/yr determine if the investment is a sound one.
You purchased a molding machine at a cost of $88,000. It has an estimateduseful life of 12 years with a salvage value of $8,000. Determine the following·:(a) The amount of annual depreciation computed by the straight-line method.(b) The amount of depreciation for the third year computed by using the double-declining-balance method.
What is the expected after-tax cash flow from selling a piece of equipment if Probst purchases the equipment today for $542,980.00, the tax rate is 34.3 percent, the equipment will be sold in 3 years for $103,000.00, and the equipment will be depreciated to $60,600.00 over 12 years using straight-line depreciation? $212,549.05 (plus or minus $10) $240,125.11 (plus or minus $10) $109,035.08 (plus or minus $10) -$41,878.05 (plus or minus $10) None of the above is within $10 of the correct answer
It is desired to purchase a piece of equipment worth $77,000 that has a useful life of four years and a salvage value of $7,000 at the end of that period. It is depreciated by SDA. Taxes are paid at a rate of 50% and the company's MARR is 13%. what should be the benefit before depreciation and taxes that the equipment generates to justify its acquisition? Answer: $30,323.48.
Mf4 Under MACRS, a commercial building is depreciated: Using the 150% declining balance method Over a 27.5 year life Using the half year convention Over a 39 year life
The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs $119,000 and will be depreciated at a CCA rate of 30%. Shell will lease the equipment to others and each year receive $33,100 in rent. At the end of five years, the firm will sell the equipment for $31,600. All values are presented in today's dollars. Calculate the overall present worth of these cash flows with tax effects if market interest rate is 10% and annual inflation rate is 2%. (Note: Don't use the $ sign in your answer and round it up to 2 decimal places)
REMOVE PERCENTAGE SIGN PRESENT 33.333333% AS 33.33
What will be the depreciation rate if GNP at MP is $12,000 and the NNP at MP is $6700
A corporate expects to receive $36,144 each year for 15 years if a particular project is undertaken. There will be an initial investment of $100,705. The expenses associated with the project are expected to be $7,740 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, determine the project's after-tax net present worth.

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS