Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net production savings are $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in actual dollars. Depreciation follows MACRS 5-year property, taxes are 40%, the actual after-tax MARR is 22.72%, and inflation is 4%.
Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net production savings are $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in actual dollars. Depreciation follows MACRS 5-year property, taxes are 40%, the actual after-tax MARR is 22.72%, and inflation is 4%.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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