In conducting an EVA analysis for year 2 for new equipment on its primary product line, Analogy, Inc., manufacturers of preassembled blower packages and other water treatment components, determined the EVA to be $28,000. Analogy uses an after-tax interest rate of 14% per year and its Te is 35%. The new equipment had a first cost of $550,000 and was MACRS depreciated using a 3-year recovery period. Since the company CEO knew that the GI was $500,000, he asked you to determine the operating expenses (OE) associated with the equipment in year 2.
In conducting an EVA analysis for year 2 for new equipment on its primary product line, Analogy, Inc., manufacturers of preassembled blower packages and other water treatment components, determined the EVA to be $28,000. Analogy uses an after-tax interest rate of 14% per year and its Te is 35%. The new equipment had a first cost of $550,000 and was MACRS depreciated using a 3-year recovery period. Since the company CEO knew that the GI was $500,000, he asked you to determine the operating expenses (OE) associated with the equipment in year 2.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
In conducting an EVA analysis for year 2 for
new equipment on its primary product line,
Analogy, Inc., manufacturers of preassembled
blower packages and other water treatment
components, determined the EVA to be $28,000.
Analogy uses an after-tax interest rate of 14%
per year and its Te is 35%. The new equipment
had a first cost of $550,000 and was MACRS
Since the company CEO knew that the GI was
$500,000, he asked you to determine the
operating expenses (OE) associated with the
equipment in year 2.
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