Please help **Milliken's Financial Analysis for Digitally Controlled Dyer**Milliken utilizes a digitally controlled dyer to place intricate and integrated patterns on manufactured carpet squares for both home and commercial uses. The dyer was purchased for $375,000, with an expected lifespan of 8 years, and it retains a salvage value of $27,000. The dyer generates an increased before-tax cash flow of $92,500 per year. The applicable tax rate for Milliken is 25%, and the after-tax minimum attractive rate of return (MARR) is 12%.**Task Overview**:Develop spreadsheet tables to determine the After-Tax Cash Flow (ATCF) for each year, as well as calculate the after-tax Present Worth (PW), Annual Worth (AW), Internal Rate of Return (IRR), and External Rate of Return (ERR) after 8 years using the following depreciation methods:a. Straight-Line Depreciation (without using the half-year convention).b. Modified Accelerated Cost Recovery System - General Depreciation System (MACRS-GDS), including the appropriate property class designation.c. Double Declining Balance Depreciation (excluding half-year convention and switching).**Analysis Table**:| | PW | AW | IRR | ERR ||--------|--------|--------|-------|-------|| a. | $ | $ | % | % || b. | $ | $ | % | % || c. | $ | $ | % | % |**Instructions**:- For part **a**, apply the straight-line method to calculate depreciation and resultant values.- For part **b**, utilize MACRS-GDS. Determine the appropriate property class to effectively compute depreciation.- For part **c**, perform calculations using the double declining balance method, with a focus on avoiding common switches or conventions typically applied. This analysis aids in understanding the financial implications of capital investments in equipment and highlights strategic planning to optimize tax savings and return on investment.

Given, Initial Cost : $375,000n=8 yearsSalvage Value : $27,000Increased before tax cashflow :…

Milliken uses a digitally controlled dyer for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased for $375,000. It is expected to last 8 years and has a salvage value of $27,000. Increased before tax cash flow due to this dyer is $92,500 per year. Milliken's tax rate is 25%, and the after-tax MARR is 12%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after 8 years. a. Use straight-line depreciation (no half-year convention). b. Use MACRS-GDS and state the appropriate property class. c. Use double declining balance depreciation (no half-year convention, no switching).

Milliken uses a digitally controlled dyer for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased for $375,000. It is expected to last 8 years and has a salvage value of $27,000. Increased before tax cash flow due to this dyer is $92,500 per year. Milliken's tax rate is 25%, and the after-tax MARR is 12%. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after 8 years. a. Use straight-line depreciation (no half-year convention). b. Use MACRS-GDS and state the appropriate property class. c. Use double declining balance depreciation (no half-year convention, no switching).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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**Milliken's Financial Analysis for Digitally Controlled Dyer**

Milliken utilizes a digitally controlled dyer to place intricate and integrated patterns on manufactured carpet squares for both home and commercial uses. The dyer was purchased for $375,000, with an expected lifespan of 8 years, and it retains a salvage value of $27,000. The dyer generates an increased before-tax cash flow of $92,500 per year. The applicable tax rate for Milliken is 25%, and the after-tax minimum attractive rate of return (MARR) is 12%.

**Task Overview**:
Develop spreadsheet tables to determine the After-Tax Cash Flow (ATCF) for each year, as well as calculate the after-tax Present Worth (PW), Annual Worth (AW), Internal Rate of Return (IRR), and External Rate of Return (ERR) after 8 years using the following depreciation methods:

a. Straight-Line Depreciation (without using the half-year convention).
b. Modified Accelerated Cost Recovery System - General Depreciation System (MACRS-GDS), including the appropriate property class designation.
c. Double Declining Balance Depreciation (excluding half-year convention and switching).

**Analysis Table**:

| | PW | AW | IRR | ERR |
|--------|--------|--------|-------|-------|
| a. | $ | $ | % | % |
| b. | $ | $ | % | % |
| c. | $ | $ | % | % |

**Instructions**:
- For part **a**, apply the straight-line method to calculate depreciation and resultant values.
- For part **b**, utilize MACRS-GDS. Determine the appropriate property class to effectively compute depreciation.
- For part **c**, perform calculations using the double declining balance method, with a focus on avoiding common switches or conventions typically applied.

This analysis aids in understanding the financial implications of capital investments in equipment and highlights strategic planning to optimize tax savings and return on investment.

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