MUST USE ONLY EXCEL SPREADSHEET FOR THIS PROBLEM A corporation with $7 million in annual taxable income and no state tax is considering two alternatives: Year 0 1-10 11-20 Before-Tax Cash Flow ($1000) Alt 1 Alt 2 (a) Present worth analysis (b) Annual cash flow analysis (c) Rate of return analysis -10,000 4,500 0 -20,000 4,500 4,500 Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of 10% after taxes, which alternative should it choose? Solve the problem by:

MUST USE ONLY EXCEL SPREADSHEET FOR THIS PROBLEM A corporation with $7 million in annual taxable income and no state tax is considering two alternatives: Year 0 1-10 11-20 Before-Tax Cash Flow ($1000) Alt 1 Alt 2 (a) Present worth analysis (b) Annual cash flow analysis (c) Rate of return analysis -10,000 4,500 0 -20,000 4,500 4,500 Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of 10% after taxes, which alternative should it choose? Solve the problem by:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

MUST USE ONLY EXCEL SPREADSHEET FOR THIS PROBLEM
A corporation with $7 million in annual taxable income and no state tax is considering two
alternatives:
Year
0
1-10
11-20
Before-Tax Cash Flow ($1000)
Alt 1
Alt 2
-10,000
4,500
0
-20,000
4,500
4,500
Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year
MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the
corporation has a minimum attractive rate of return of 10% after taxes, which alternative
should it choose? Solve the problem by:
(a) Present worth analysis
(b) Annual cash flow analysis
(c) Rate of return analysis
(d) Future worth analysis
(e) Benefit-cost ratio analysis

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