The Ingersoll Engineering Company is considering the purchase of a gas flow meter. Its purchase price is $9,500 and another $500 will be spent shipping and installing this device. Use of the meter is expected to result in a $9,000 annual increase in revenue, and operating expenses are estimated to be $5,000 per year. The meter will be used for five years, and then it will be sold for an estimated market value of $2,500. The meter's MACRS property class is five years. Determine the after-tax IRR on this investment if the effective income tax rate (t) is 40%. If the after-tax MARR is 10%, should this gas flow meter be purchased, installed and utilized by the company? What is the payback period based on the after-tax cash flows? (7.10)

The Ingersoll Engineering Company is considering the purchase of a gas flow meter. Its purchase price is $9,500 and another $500 will be spent shipping and installing this device. Use of the meter is expected to result in a $9,000 annual increase in revenue, and operating expenses are estimated to be $5,000 per year. The meter will be used for five years, and then it will be sold for an estimated market value of $2,500. The meter's MACRS property class is five years. Determine the after-tax IRR on this investment if the effective income tax rate (t) is 40%. If the after-tax MARR is 10%, should this gas flow meter be purchased, installed and utilized by the company? What is the payback period based on the after-tax cash flows? (7.10)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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