Explanation The recovery rate under the General Depreciation System for 5 years is given in the below table: Year RR 1 0.2 2 0.32 3 0.192 4 0.1152 5 0.1152 Depreciation (D) can be calculated by using the following formula. Purchase price includes installation cost. D i = Purchase price × RR i (1) Substitute the respective values in Equation (1) to calculate the depreciation in year 1. D i = 365 ,000 × 0 .2 = 73 , 000 First year depreciation is $73,000. Before tax cash flow is denoted by BTCF which is the net annual revenue. Taxable income (TI) can be calculated by using the following formula. TI i = BTCF i − Depreciation i (2) Substitute the respective values in Equation (2) to calculate the taxable income. TI i = 90 , 000 − 73,000 = 17 , 000 Taxable income in the year 1 is $17,000. Tax payment (TP) can be calculated as follows. TP i = TI i × ( − Tax rate ) (3) Substitute the respective values in Equation (3) to calculate the tax payment. TP 1 = 17 , 000 × ( − 0 .24 ) = − 4 , 080 Taxable income in the year 1 is -$4,080. After tax cash flow (ATCF) can be calculated as follows. ATCF i = BTCF i + TP i (4) Substitute the respective values in Equation (4) to calculate the ATCF for the first year. ATCF 1 = 90 , 000 + ( − 4 , 080 ) = 85 , 920 ATCF in the year 1 is $825,920. Table 1 shows the value of ATCF that obtained by using Equations (1), (2), (3) and (4). The last year BTCF is included the selling price value or salvage value. Table 1 Year BTCF Depreciation TI Tax amount ATCF 0 -365,000 -365,000 1 90,000 73,000 17,000 -4,080 85,920 2 90,000 116,800 -26,800 6,432 96,432 3 90,000 70,080 19,920 -4,781 85,219 4 90,000 42,048 47,952 -11,508 78,492 5 90,000 21,024 68,976 -16,554 73,446 5a 20,000 0 -22,048 5,292 25,292 Time period is denoted by n and the interest is denoted by i

Engineering Economy, Student Value Edition (17th Edition)

17th Edition

ISBN: 9780134838137

Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher: PEARSON

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Chapter 7, Problem 31P

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Calculate the annual worth of after tax cash flow.

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Chapter 7, Problem 30P

Chapter 7, Problem 32P

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Engineering Economy, Student Value Edition (17th Edition)

Ch. 7 - How are depreciation deductions different from...Ch. 7 - Prob. 2P Ch. 7 - Explain the difference between real and personal...Ch. 7 - Prob. 4P Ch. 7 - Prob. 5P Ch. 7 - Prob. 6P Ch. 7 - Prob. 7P Ch. 7 - Prob. 8P Ch. 7 - Prob. 9P Ch. 7 - Prob. 10P

Ch. 7 - Prob. 11P Ch. 7 - Prob. 12P Ch. 7 - Prob. 13P Ch. 7 - Prob. 14P Ch. 7 - A manufacturer of aerospace products purchased...Ch. 7 - Prob. 16P Ch. 7 - Prob. 17P Ch. 7 - Prob. 18P Ch. 7 - Prob. 19P Ch. 7 - Prob. 20P Ch. 7 - Prob. 21P Ch. 7 - Prob. 22P Ch. 7 - Prob. 23P Ch. 7 - Prob. 24P Ch. 7 - Prob. 25P Ch. 7 - Prob. 26P Ch. 7 - Prob. 27P Ch. 7 - Prob. 28P Ch. 7 - Prob. 29P Ch. 7 - Prob. 30P Ch. 7 - Prob. 31P Ch. 7 - Prob. 32P Ch. 7 - Prob. 33P Ch. 7 - Refer to Problem 6-79. The alternatives all have a...Ch. 7 - Prob. 35P Ch. 7 - Prob. 36P Ch. 7 - Prob. 37P Ch. 7 - Prob. 38P Ch. 7 - Prob. 39P Ch. 7 - Prob. 40P Ch. 7 - Prob. 41P Ch. 7 - Prob. 42P Ch. 7 - Prob. 43P Ch. 7 - Prob. 44P Ch. 7 - Prob. 45P Ch. 7 - Prob. 46P Ch. 7 - AMT, Inc., is considering the purchase of a...Ch. 7 - Prob. 48P Ch. 7 - Prob. 49P Ch. 7 - Prob. 50P Ch. 7 - Prob. 51P Ch. 7 - Prob. 52P Ch. 7 - Determine the after-tax yield (i.e., IRR on the...Ch. 7 - A 529-state-approved Individual Retirement Account...Ch. 7 - Prob. 55P Ch. 7 - Prob. 56P Ch. 7 - Prob. 57SE Ch. 7 - Prob. 58SE Ch. 7 - Prob. 59SE Ch. 7 - Refer to the chapter opener and Example 7-14. As...Ch. 7 - Prob. 61FE Ch. 7 - The Parkview Hospital is considering the purchase...Ch. 7 - Prob. 63FE Ch. 7 - Prob. 64FE Ch. 7 - Prob. 65FE Ch. 7 - Prob. 66FE Ch. 7 - Prob. 67FE Ch. 7 - Prob. 68FE Ch. 7 - Prob. 69FE Ch. 7 - Prob. 70FE Ch. 7 - Prob. 71FE Ch. 7 - Prob. 72FE Ch. 7 - Prob. 73FE Ch. 7 - Prob. 74FE Ch. 7 - Prob. 75FE Ch. 7 - If the federal income tax rate is 35% and the...Ch. 7 - Prob. 77FE Ch. 7 - Acme Manufacturing makes their preliminary...Ch. 7 - Prob. 79FE Ch. 7 - Prob. 80FE Ch. 7 - Prob. 81FE Ch. 7 - Prob. 82FE Ch. 7 - Prob. 83FE Ch. 7 - Prob. 84FE Ch. 7 - Two insulation thickness alternatives have been...

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