Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $1,320,000 and will have a salvage value of $160,000 after 8 years. Its use will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. All dollar amounts are expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 25%, the real after-tax MARR is 10%, and inflation is 3.2%. a. Determine the actual after-tax cash flows for each year. ATCFO = $ ATCF - $ ATCF, = $ ATCF3 = $ ATCF = $ ATCF; - $ ATCF, = $ ATCF, - $ ATCF: - $

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be
used for rigorous reliability testing and burn-in. It is installed for $1,320,000 and will have a salvage value of $160,000 after 8 years.
Its use will create an opportunity to increase sales by $650.000 per year and will have operating expenses of $250,000 per year. All
dollar amounts are expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 25%, the real after-tax MARR
is 10%, and inflation is 3.2%.
a. Determine the actual after-tax cash flows for each year.
ATCFO = $
ATCF, - $
ATCF, = $
ATCF: = $
ATCF-$
ATCF; = $
ATCF, - $
ATCF, - $
ATCF - $
Transcribed Image Text:Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $1,320,000 and will have a salvage value of $160,000 after 8 years. Its use will create an opportunity to increase sales by $650.000 per year and will have operating expenses of $250,000 per year. All dollar amounts are expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 25%, the real after-tax MARR is 10%, and inflation is 3.2%. a. Determine the actual after-tax cash flows for each year. ATCFO = $ ATCF, - $ ATCF, = $ ATCF: = $ ATCF-$ ATCF; = $ ATCF, - $ ATCF, - $ ATCF - $
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