natives below. The after-tax MARR is 10% per year, MACRS depreciation applies, andT.= 42%. The (GI – OE) estimate is made for the first three years; it is zero in year 4 when each asset is sold. Alternative First Cost. $ -8,000 -13,000 Salvage value, year 4, $ GI – OE, $ per year 3,500 5,000 Recovery period, years

natives below. The after-tax MARR is 10% per year, MACRS depreciation applies, andT.= 42%. The (GI – OE) estimate is made for the first three years; it is zero in year 4 when each asset is sold. Alternative First Cost. $ -8,000 -13,000 Salvage value, year 4, $ GI – OE, $ per year 3,500 5,000 Recovery period, years

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Perform a PW-based evaluation of the two alternatives below.
The after-tax MARR is 10% per year, MACRS depreciation
applies, and T.= 42%. The (GI – OE) estimate is made for the
first three years; it is zero in year 4 when each asset is sold.
%3D
Alternative
First Cost. $
-8,000
-13,000
Salvage value, year 4, $
GI – OE, $ per year
3,500
5,000
Recovery period, years

Calculation of CFAT
Gross
Income
Operating
Expense
OE
Investment
and Salvage
P and S
Taxable
Income
Year
CFBT
Depreciatlon
Taxes
CFAT
GI
TI
(1)
(2)
(3)
(4) =
(1) ► (2) ► (3)
(6) =
(7) = (8) =
T. (6)
(5)
%3D
%3D
(1) (2)- (5)
(4)-(7)

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