Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operatin expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end c the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. 5tate income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the respective PWs at EOY0 using an MARR of 12%.
Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operatin expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end c the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. 5tate income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the respective PWs at EOY0 using an MARR of 12%.
Chapter1: Making Economics Decisions
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![Certain new machinery used in manufacturing of motor vehicles, when placed in
service, is estimated to cost $275,000. It is expected to reduce net annual operatin
expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end e
the 10th year. Assume that the frm is in the federal taxable income bracket of
$335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income
taxes are deductible from federal taxable income. This machinery is to be
depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute
for the respective PWs at EOYO using an MARR of 12%.
Cash Flow for
Before-Tax
Cash Flow
($)
Depreciation Taxable
Income ($)
($)
After-Tax
EOY
Income Taxes
Cash Flow ($)
($)
[1]
1
[2]
[3]
2
[4]
[5]
5
[6]
8.
[7]
10
[8]
PW(0)
using
[9]
[10]
MARR
Based on Before-Tax Analysis, is this machinery worth
[11]
investing in? {"YES"/"NO")
Based on After-Tax Analysis, is this machinery worth
[12]
investing in? {"YES"/"NO")](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0f04f8b4-91ce-4eef-99a2-e66fc85a3e37%2F51f32f56-77b9-4d2e-9973-5e9977040dc2%2Fl4z60bs_processed.png&w=3840&q=75)
Transcribed Image Text:Certain new machinery used in manufacturing of motor vehicles, when placed in
service, is estimated to cost $275,000. It is expected to reduce net annual operatin
expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end e
the 10th year. Assume that the frm is in the federal taxable income bracket of
$335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income
taxes are deductible from federal taxable income. This machinery is to be
depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute
for the respective PWs at EOYO using an MARR of 12%.
Cash Flow for
Before-Tax
Cash Flow
($)
Depreciation Taxable
Income ($)
($)
After-Tax
EOY
Income Taxes
Cash Flow ($)
($)
[1]
1
[2]
[3]
2
[4]
[5]
5
[6]
8.
[7]
10
[8]
PW(0)
using
[9]
[10]
MARR
Based on Before-Tax Analysis, is this machinery worth
[11]
investing in? {"YES"/"NO")
Based on After-Tax Analysis, is this machinery worth
[12]
investing in? {"YES"/"NO")
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