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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 $1,380,000 and will have a salvage value of $190,000 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 3.8%. a. Determine the actual after-tax cash flows for each year. ATCF0 = $ ATCF₁ = $ ATCF₂ = $ ATCF3 = $ ATCF4 = $ ATCF5 = $ ATCF6 = $ ATCF7 = $ ATCF8 = $

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 $1,380,000 and will have a salvage value of $190,000 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 3.8%. a. Determine the actual after-tax cash flows for each year. ATCF0 = $ ATCF₁ = $ ATCF₂ = $ ATCF3 = $ ATCF4 = $ ATCF5 = $ ATCF6 = $ ATCF7 = $ ATCF8 = $

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 $1,380,000 and will have a salvage value of $190,000 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 3.8%. a. Determine the actual after-tax cash flows for each year. ATCF0 = $ ATCF₁ = $ ATCF2 = $ ATCF3 = $ ATCF4 = $ ATCF5 = $ ATCF6 = $ ATCF7 = $ ATCF8 = $
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 $1,380,000 and will have a salvage value of $190,000 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 3.8%. a. Determine the actual after-tax cash flows for each year. ATCF0 = $ ATCF₁ = $ ATCF2 = $ ATCF3 = $ ATCF4 = $ ATCF5 = $ ATCF6 = $ ATCF7 = $ ATCF8 = $
b. Determine the PW of the after-tax cash flows. PW $T = $ c. Determine the AW of the after-tax cash flows. AW $T = $ d. Determine the FW of the after-tax cash flows. FW $T = $ e. Determine the combined IRR of the after-tax cash flows. IRR % f. Determine the combined ERR of the after-tax cash flows. ERRC = % g. Determine the real IRR of the after-tax cash flows. IRR₁ = % h. Determine the real ERR of the after-tax cash flows. ERR = = % Parts a-d: Round your answer to 2 decimal places. The tolerance is ± 5. Parts e-h: Round your answer to 2 decimal places and present in percentage format. The tolerance is ± 0.1.
Transcribed Image Text:b. Determine the PW of the after-tax cash flows. PW $T = $ c. Determine the AW of the after-tax cash flows. AW $T = $ d. Determine the FW of the after-tax cash flows. FW $T = $ e. Determine the combined IRR of the after-tax cash flows. IRR % f. Determine the combined ERR of the after-tax cash flows. ERRC = % g. Determine the real IRR of the after-tax cash flows. IRR₁ = % h. Determine the real ERR of the after-tax cash flows. ERR = = % Parts a-d: Round your answer to 2 decimal places. The tolerance is ± 5. Parts e-h: Round your answer to 2 decimal places and present in percentage format. The tolerance is ± 0.1.
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