large company is planning to purchase equipment costing $220,000 and will depreciate it fully using straight-line depreciation over 8 years. The company expects that the investment will have an annual benefit of $54,000. Each use of the equipment will also provide a benefit of $25. In 5 years, there will be no salvage value for the equipment. The company's combined marginal tax rate is 24%. Based on 12% after-tax MARR, how many uses of the equipment must the company have each year in order to justify its investment? Question 8 Part H: What is the break-even value?
Theory and Design for Mechanical Measurements
Measurement is a term that refers to analyzing a manufactured component regarding the degree of accuracy for dimensions, tolerances, geometric profile, roundness, flatness, smoothness, etc. Measurement always involves comparing the manufactured component or the prototype with a standard specimen whose dimensions and other parameters are assumed to be perfect and do not undergo changes with respect to time.Precisely in mechanical engineering the branch that deals with the application of scientific principles for measurements is known as metrology. The domain of metrology in general deals with various measurements like mechanical, chemical, thermodynamic, physical, and biological measurements. In mechanical engineering, the measurements are limited to mechanical specific such as length, mass, surface profile, flatness, roundness, viscosity, heat transfer, etc.
Basic principles of engineering metrology
Metrology is described as the science of measurement, precision, and accuracy. In other words, it is a method of measurement based on units and predefined standards.
A large company is planning to purchase equipment costing $220,000 and will depreciate it fully using straight-line depreciation over 8 years. The company expects that the investment will have an annual benefit of $54,000. Each use of the equipment will also provide a benefit of $25. In 5 years, there will be no salvage value for the equipment. The company's combined marginal tax rate is 24%. Based on 12% after-tax MARR, how many uses of the equipment must the company have each year in order to justify its investment?
Question 8 Part H: What is the break-even value?
cashflow before tax = 54,000+25x ((where X is the number of uses per year).
Depreciation = 220000/8= 27500
Tax benefit of depreciation = 27500*24% = 6600
after-tax fixed annual benefits = 54000*(1-24%) = 41040
after-tax per unit benefit = 25*(1-24%) = 19
After-Tax Cash Flow (ATCF) value
= 41040+6600+19x
=47640+19x
Break-even Value
-220,000 +(47640+19x) X PVIFA(12%,5YEARS) =0
-220,000+(47640+19x) X3.60478 =0
47640+19x = 220,000/3.60478
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