ENGINEERING ECONOMY DIGITAL ACCESS
ENGINEERING ECONOMY DIGITAL ACCESS
8th Edition
ISBN: 2810022611683
Author: Blank
Publisher: MCG
Question
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Chapter 17, Problem 56P

(a):

To determine

Calculate the cash flow after tax.

(a):

Expert Solution
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Explanation of Solution

The cash flow after tax (CFAT) for defender in year 0 is equal to its market value. Thus, the cash flow after tax for the defender is -$100,000.

The cash flow after tax (CFAT) for challenger can be calculated as follows:

CFATChallenger=First costChallenger+(First costDefender2(DepreciationDefender)Market valueDefender)×Te=420,000+(300,0002(60,000)100,000)×0.35=392,000

The cash flow after tax for the challenger is -$392,000.

Thus, select alternate B.

(b):

To determine

Calculate the cash flow after tax for three years.

(b):

Expert Solution
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Explanation of Solution

The cash flow after tax (CFAT) of defender for first three years can be calculated as follows:

CFATDefender=Chargeable expenseDefender(Chargeable expenseDefenderDepreciationDefender)×Te=120,000(120,000(60,000))×0.35=57,000

The cash flow after tax of the defender is -$57,000.

The cash flow after tax (CFAT) of challenger for first three years can be calculated as follows:

CFATDefender=Chargeable expenseChallenger(Chargeable expenseChallenger(DepreciationChallenger))×Te=30,000(30,000(140,000))×0.35=29,500

The cash flow after tax of the defender is -$57,000.

(c):

To determine

Calculate the annual worth.

(c):

Expert Solution
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Explanation of Solution

The time period is indicated by ‘n’. The MARR is indicated by ‘i’. The annual worth (AW) of defender can be calculated as follows:

AWDefender=CFATDefender in year 0(i(1+i)n(1+i)n1)CFATDefender for three years=100,000(0.15(1+0.15)3(1+0.15)31)57,000=100,000(0.43798)57,000=100,798

The annual worth of the defender is -$100,798.

The annual worth (AW) of challenger can be calculated as follows:

AWChallenger=CFATChallenger in year 0(i(1+i)n(1+i)n1)CFATChallenger for three years=392,000(0.15(1+0.15)3(1+0.15)31)29,500=392,000(0.43798)29,500=142,188

The annual worth of the defender is -$100,798. Since the annual worth of the defender is greater than the challenger, keep the defender.

(d):

To determine

Calculate the annual worth through spreadsheet.

(d):

Expert Solution
Check Mark

Explanation of Solution

The annual worth of defender and challenger can be calculated using spreadsheet as follows:

ENGINEERING ECONOMY DIGITAL ACCESS, Chapter 17, Problem 56P

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Chapter 17 Solutions

ENGINEERING ECONOMY DIGITAL ACCESS

Ch. 17 - Prob. 11PCh. 17 - Prob. 12PCh. 17 - Prob. 13PCh. 17 - Prob. 14PCh. 17 - Prob. 15PCh. 17 - Prob. 16PCh. 17 - Prob. 17PCh. 17 - Prob. 18PCh. 17 - Prob. 19PCh. 17 - Prob. 20PCh. 17 - Prob. 21PCh. 17 - Prob. 22PCh. 17 - Prob. 23PCh. 17 - Prob. 24PCh. 17 - Prob. 25PCh. 17 - Prob. 26PCh. 17 - Prob. 27PCh. 17 - Prob. 28PCh. 17 - Prob. 29PCh. 17 - Prob. 30PCh. 17 - Prob. 31PCh. 17 - Prob. 32PCh. 17 - Prob. 33PCh. 17 - Prob. 34PCh. 17 - Prob. 35PCh. 17 - Prob. 36PCh. 17 - Prob. 37PCh. 17 - Prob. 38PCh. 17 - Prob. 39PCh. 17 - Prob. 40PCh. 17 - Prob. 41PCh. 17 - Prob. 42PCh. 17 - Prob. 43PCh. 17 - Prob. 44PCh. 17 - Prob. 45PCh. 17 - Prob. 46PCh. 17 - Prob. 47PCh. 17 - Prob. 48PCh. 17 - Prob. 49PCh. 17 - Prob. 50PCh. 17 - Prob. 51PCh. 17 - Prob. 52PCh. 17 - Prob. 53PCh. 17 - Prob. 54PCh. 17 - Prob. 55PCh. 17 - Prob. 56PCh. 17 - Prob. 57PCh. 17 - Prob. 58PCh. 17 - Prob. 59PCh. 17 - Prob. 60PCh. 17 - Prob. 61PCh. 17 - Prob. 62PCh. 17 - Prob. 63PCh. 17 - Prob. 64PCh. 17 - Prob. 65PCh. 17 - Prob. 66PCh. 17 - Prob. 67PCh. 17 - Prob. 68PCh. 17 - Prob. 69PCh. 17 - Prob. 70PCh. 17 - Prob. 71PCh. 17 - Prob. 72PCh. 17 - Prob. 73PCh. 17 - Prob. 74PCh. 17 - Prob. 75PCh. 17 - Prob. 76APQCh. 17 - Prob. 77APQCh. 17 - Prob. 78APQCh. 17 - Prob. 79APQCh. 17 - Prob. 80APQCh. 17 - Prob. 81APQCh. 17 - Prob. 82APQCh. 17 - Prob. 83APQCh. 17 - Prob. 84APQCh. 17 - Prob. 85APQCh. 17 - Prob. 86APQCh. 17 - Prob. 87APQCh. 17 - Prob. 88APQCh. 17 - Prob. 1CSCh. 17 - Prob. 2CSCh. 17 - Prob. 3CSCh. 17 - Prob. 4CS
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