ENGINEERING ECONOMIC ENHANCED EBOOK
14th Edition
ISBN: 9780190931940
Author: NEWNAN
Publisher: OXF
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Question
Chapter 12, Problem 56P
(a)
To determine
To find: The
(b)
To determine
To find: The rate of return after income tax.
(c)
To determine
To find: The rate of return after income tax when the useful life of an asset is 20 years.
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Machinery for an assembly line has a cost basis of $150,000 and an expected salvage of $25,000. It is not subject to special limitations for bonus depreciation. How much bonus depreciation was, is, or will be allowed (a) in 2014? (b) in 2018? (c) in 2024? (d) in 2026?
A firm must decide between two designs. Their effective income tax rate is 33%, and MACRS depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen?
Design B
$2,040,000
$1,150,000
Design A
$940,000
$910,000
Capital investment
MV at end of useful life
$260,000
5 years
Annual revenues less expenses
$410,000
MACRS property class
Useful life
5 years
6 years
7 years
Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
Calculate the AW value for the Design A.
AWA(12%) = $ (Round to the nearest dollar.)
Calculate the AW value for the Design B.
AWg(12%) = $
(Round to the nearest dollar.)
Based on the AW values,
should be chosen.
MUST USE ONLY EXCEL SPREADSHEET FOR THIS PROBLEM
A corporation with $7 million in annual taxable income and no state tax is considering two
alternatives:
Year
0
1-10
11-20
Before-Tax Cash Flow ($1000)
Alt 1
Alt 2
-10,000
4,500
0
-20,000
4,500
4,500
Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year
MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the
corporation has a minimum attractive rate of return of 10% after taxes, which alternative
should it choose? Solve the problem by:
(a) Present worth analysis
(b) Annual cash flow analysis
(c) Rate of return analysis
(d) Future worth analysis
(e) Benefit-cost ratio analysis
Chapter 12 Solutions
ENGINEERING ECONOMIC ENHANCED EBOOK
Ch. 12 - Prob. 1QTCCh. 12 - Prob. 2QTCCh. 12 - Prob. 3QTCCh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Prob. 7P
Ch. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10PCh. 12 - Prob. 11PCh. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Prob. 27PCh. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Prob. 42PCh. 12 - Prob. 43PCh. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Prob. 50PCh. 12 - Prob. 51PCh. 12 - Prob. 52PCh. 12 - Prob. 53PCh. 12 - Prob. 54PCh. 12 - Prob. 55PCh. 12 - Prob. 56PCh. 12 - Prob. 57PCh. 12 - Prob. 58PCh. 12 - Prob. 59PCh. 12 - Prob. 60PCh. 12 - Prob. 61PCh. 12 - Prob. 62PCh. 12 - Prob. 63PCh. 12 - Prob. 64PCh. 12 - Prob. 65P
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