Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 7, Problem 33P
To determine
Calculate the minimum time period.
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Madison Manufacturing is considering a new machine that costs $350,000 and would
reduce pre-tax manufacturing costs by $110,000 annually. Madison would use the 3-year
MACRS method to depreciate the machine, and management thinks the machine would
have a value of $33,000 at the end of its 5-year operating life. The applicable
depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. Working capital would
increase by $35,000 initially, but it would be recovered at the end of the project's 5-year
life. Madison's marginal tax rate is 25%, and a 10% cost of capital is appropriate for the
project.
1. Calculate the project's NPV, IRR, MIRR, and payback.
2. Assume management is unsure about the $110,000 cost savings this figure
could deviate by as much as plus or minus 20%. What would the NPV be under
each of these extremes?
3. Suppose the CFO wants you to do a scenario analysis with different values for the
cost savings, the machine's salvage value, and the working capital (WC)
requirement.…
Solve correctly in excel
Six years ago, a company purchased $30,000 of equipment. The equipment has just been sold for $5000. The equipment was depreciated using 50% bonus depreciation / 50% MACRS (using a 5-year recovery period). The actual savings due to the purchase of the equipment is shown below. The firm's MARR is 12% and it's tax rate is 25%. What is the after-tax present worth of the investment?
Year
1
2
3
4
5
6
Savings
5000
6000
7000
7000
4000
3000
What is the expected after-tax cash flow from selling a piece of equipment if Probst purchases the equipment today for $542,980.00, the tax rate is 34.3
percent, the equipment will be sold in 3 years for $103,000.00, and the equipment will be depreciated to $60,600.00 over 12 years using straight-line
depreciation?
$212,549.05 (plus or minus $10)
$240,125.11 (plus or minus $10)
$109,035.08 (plus or minus $10)
-$41,878.05 (plus or minus $10)
None of the above is within $10 of the correct answer
Chapter 7 Solutions
Engineering Economy
Ch. 7 - How are depreciation deductions different from...Ch. 7 - Prob. 2PCh. 7 - Explain the difference between real and personal...Ch. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10P
Ch. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - A manufacturer of aerospace products purchased...Ch. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Prob. 47PCh. 7 - Prob. 48PCh. 7 - Prob. 49PCh. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Determine the after-tax yield (i.e., IRR on the...Ch. 7 - A 529-state-approved Individual Retirement Account...Ch. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - Prob. 57SECh. 7 - Prob. 58SECh. 7 - Prob. 59SECh. 7 - Prob. 60SECh. 7 - Prob. 61FECh. 7 - Prob. 62FECh. 7 - Prob. 63FECh. 7 - Prob. 64FECh. 7 - Prob. 65FECh. 7 - Prob. 66FECh. 7 - Prob. 67FECh. 7 - Prob. 68FECh. 7 - Prob. 69FECh. 7 - Prob. 70FECh. 7 - Prob. 71FECh. 7 - Prob. 72FECh. 7 - Prob. 73FECh. 7 - Prob. 74FECh. 7 - Prob. 75FECh. 7 - If the federal income tax rate is 35% and the...Ch. 7 - Prob. 77FECh. 7 - Prob. 78FECh. 7 - Prob. 79FECh. 7 - Prob. 80FECh. 7 - Prob. 81FECh. 7 - Prob. 82FECh. 7 - Prob. 83FECh. 7 - Prob. 84FE
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