Henredon purchases a high-precision programmable router for shaping furniture components for $190,000. It is expected to last 12 years and have a salvage value of $5,000. It will produce $45,000 in net revenue each year during its life. Corporate income taxes are 40 percent, and the after-tax MARR is 10 percent. Determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR, if the router is kept for 12 years.
Henredon purchases a high-precision programmable router for shaping furniture components for $190,000. It is expected to last 12 years and have a salvage value of $5,000. It will produce $45,000 in net revenue each year during its life. Corporate income taxes are 40 percent, and the after-tax MARR is 10 percent. Determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR, if the router is kept for 12 years.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Henredon purchases a high-precision programmable router for shaping furniture components for $190,000. It is expected to last 12 years and have a salvage value of $5,000. It will produce $45,000 in net revenue each year during its life. Corporate income taxes are 40 percent, and the after-tax MARR is 10 percent. Determine the ATCF for each year and the after-tax PW, AW,
Transcribed Image Text:MACRS-GDS percentages for 3-, 5-, 7-, and 10-year property are 200%
DBSLH and 15- and 20-year property are 150% DBSLH
TABLE 8.3
3-Year
5-Year
7-Year
10-Year
15-Year
20-Year
EOY
Property
Property Property
Property Property Property
1
33.33
20.00
14.29
10.00
5.00
3.750
2
44.45
32.00
24.49
18.00
9.50
7.219
14.81
19.20
17.49
14.40
8.55
6.677
4
7.41
11.52
12.49
11.52
7.70
6.177
11.52
8.93
9.22
6.93
5.713
6.
5.76
8.92
7.37
6.23
5.285
7
8.93
6.55
5.90
4.888
8
4.46
6.55
5.90
4.522
6.56
5.91
4.462
10
6.55
5.90
4.461
11
3.28
5.91
4.462
12
5.90
4.461
13
5.91
4.462
14
5.90
4.461
15
5.91
4.462
16
2.95
4.461
17
4.462
18
4.461
19
4.462
20
4.461
21
2.231
3.
Transcribed Image Text:Use MACRS-GDS and state the appropriate property class.
End of Year
ATCF
$
1
2$
2$
4
$
$
7
$
8.
9.
2$
10
$
11
12
After-tax PW: $
After-tax AW: $
For dollar amounts, carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The
tolerance is ±10.
After-tax IRR:
After-tax ERR:
%24
%24
%24
%24
%24
LO
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