For Nos 45-47: The following cash flows are provided A 7.00% B. 8.40% EDY C. 6.00% D. 6.50% BTCF Onvestment) (1.000.000) 1.000.000 1,000,000 In addition, the salvage value of the project at the end of its life is 10% of the investment. The MARR (before tax is 10% and the tax rate is 35%. Assume straight-line depreciation method. 45. What is the after-tax MARR for this investment? 750,000 800.000

For Nos 45-47: The following cash flows are provided A 7.00% B. 8.40% EDY C. 6.00% D. 6.50% BTCF Onvestment) (1.000.000) 1.000.000 1,000,000 In addition, the salvage value of the project at the end of its life is 10% of the investment. The MARR (before tax is 10% and the tax rate is 35%. Assume straight-line depreciation method. 45. What is the after-tax MARR for this investment? 750,000 800.000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A firm must decide between two designs. Their effective income tax rate is 33%, and MACRS depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design B $2,040,000 $1,150,000 Design A $940,000 $910,000 Capital investment MV at end of useful life $260,000 5 years Annual revenues less expenses $410,000 MACRS property class Useful life 5 years 6 years 7 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. Calculate the AW value for the Design A. AWA(12%) = $ (Round to the nearest dollar.) Calculate the AW value for the Design B. AWg(12%) = $ (Round to the nearest dollar.) Based on the AW values, should be chosen.
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