An oil and gas company is trying to determine whether or not it should replace a fixture on one of its offshore oil wells. The fixture would cost $64,000 and would generate annual savings of $25,000 for each of the next 4 years; at the end of 4 years, the fixture woul have negligible salvage value. The fixture will be depreciated using MACRS as 5-year property, the company's after-tax MARR is 6%, and the tax rate is 29%. Compute the FW and use this to determine whether or not the company should replace the fixture. 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. $ 13095.6
An oil and gas company is trying to determine whether or not it should replace a fixture on one of its offshore oil wells. The fixture would cost $64,000 and would generate annual savings of $25,000 for each of the next 4 years; at the end of 4 years, the fixture woul have negligible salvage value. The fixture will be depreciated using MACRS as 5-year property, the company's after-tax MARR is 6%, and the tax rate is 29%. Compute the FW and use this to determine whether or not the company should replace the fixture. 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. $ 13095.6
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:An oil and gas company is trying to determine whether or not it should replace a fixture on one of its offshore oil wells. The fixture
would cost $64,000 and would generate annual savings of $25,000 for each of the next 4 years; at the end of 4 years, the fixture would
have negligible salvage value. The fixture will be depreciated using MACRS as 5-year property, the company's after-tax MARR is 6%,
and the tax rate is 29%. Compute the FW and use this to determine whether or not the company should replace the fixture.
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.
$
13095.6
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