Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 11, Problem 31P
(a):
To determine
Calculate the after tax cash flow.
(b):
To determine
Calculate the
(c):
To determine
Calculate the after tax cash flow with inflation.
(d):
To determine
Calculate the loss in present value.
(e):
To determine
Calculate the required additional annual revenue.
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Students have asked these similar questions
A firm can purchase a centrifugal separator (5-year MACRS property) for
$22,000.
The estimated salvage value is
$4,000
after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be
$2,200.
These O&M costs are projected to increase by
$1,000
per year each year thereafter. The income tax rate is
24%
and the MARR is
11%
after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis?
B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its
line. The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be
depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment's product
each year. The expected annual income related to this equipment follows.
Sales
$ 150,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)
Depreciation on new equipment
Selling and administrative expenses
80,000
20,000
15,000
Total costs and expenses
115,000
Pretax income
35,000
10,500
Income taxes (30%)
Net income
$24,500
1. Compute the payback period.
Payback Period
Choose
Denominator:
Payback
Period
Choose Numerator:
Payback
period
II
Replacement versus expansion cash flows- Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equipment to replace old equipment. If the firm makes this investment, it will sell the old equipment and receive after-tax proceeds of $1,551,000. If the firm decides not to undertake this project, the old equipment will remain in service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following table:
New equipment Old equipmentNew equipment cost -4,645,000 Year Operating cash flows 1 551,000 372,000 2 931,000 372,000 3 1,344,000 372,000 4 2,221,000 372,000 5 3,399,000 372,000
New Equipment
Old Equipment
New Equipment Cost
-$4,645,000
Year
Operating
Cash Flows
1
$551,000
$372,000
2
$931,000
$372,000
3
$1,344,000
$372,000
4
$2,221,000
$372,000
5
$3,399,000…
Chapter 11 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - An annuity provides for 10 consecutive end-of-year...Ch. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10P
Ch. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 30PCh. 11 - Prob. 31PCh. 11 - Prob. 1STCh. 11 - Prob. 2STCh. 11 - Prob. 3ST
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