ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Chapter 12, Problem 64P
To determine
Introduction: Income tax is the amount paid as a tax to the federal government or state government. This tax is generally levied each year.
To select: The most suitable machine from four mutually exclusive models.
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It is desired to purchase a piece of equipment worth $77,000 that has a useful life of four years and a salvage value of $7,000 at the end of that period. It is depreciated by SDA. Taxes are paid at a rate of 50% and the company's MARR is 13%. what should be the benefit before depreciation and taxes that the equipment generates to justify its acquisition?
Answer: $30,323.48.
One year ago, your company purchased a machine used in manufacturing for $90,000. You have learned that a new
machine is available that offers many advantages and you can purchase it for $145,000 today. It will be depreciated on a
straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin
(revenues minus operating expenses other than depreciation) of $45,000 per year for the next 10 years. The current machine
is expected to produce a gross margin of $22,000 per year. The current machine is being depreciated on a straight-line basis
over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $8,182 per year.
The market value today of the current machine is $60,000. Your company's tax rate is 42%, and the opportunity cost of
capital for this type of equipment is 10%. Should your company replace its year-old machine?
CRITE
The NPV of replacing the year-old machine is 5 (Round to…
One year ago, your company purchased a machine used in manufacturing for $105,000. You have learned that a new
machine is available that offers many advantages and you can purchase it for $160,000 today. It will be depreciated on
a straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross
margin (revenues minus operating expenses other than depreciation) of $60,000 per year for the next 10 years. The
current machine is expected to produce a gross margin of $21,000 per year. The current machine is being depreciated
on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current
machine is $9,545 per year. The market value today of the current machine is $65,000. Your company's tax rate is
40%, and the opportunity cost of capital for this type of equipment is 10%. Should your company replace its year-old
machine?
The NPV of replacing the year-old machine is $
(Round to the…
Chapter 12 Solutions
ENGR.ECONOMIC ANALYSIS
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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