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A highway contractor is considering buying a new trench excavator that costs $130000 and can dig a 1-metre-wide trench at the rate of 5 metres per hour. With the machine adequately maintained, its production rate will remain constant for the first 1200 hours of operation and then decrease by 0.5 metres per hour each year. The excavator is expected to dig 2 kilometres each year. Maintenance and operating costs will be $15 per hour. The excavator has a CCA rate of 30%. At the end of five years, the excavator will be sold for $33000. Assuming that the contractor's marginal tax rate is 34% per year, determine the annual after-tax cash flow. Please use MARR=0% for this question. Net Present Worth (MARR)=$ Net Annual Worth (MARR)=$ IRR= % Year 0 1 2 3 4 5 Cash flow $ $ $ $ $ $

A highway contractor is considering buying a new trench excavator that costs $130000 and can dig a 1-metre-wide trench at the rate of 5 metres per hour. With the machine adequately maintained, its production rate will remain constant for the first 1200 hours of operation and then decrease by 0.5 metres per hour each year. The excavator is expected to dig 2 kilometres each year. Maintenance and operating costs will be $15 per hour. The excavator has a CCA rate of 30%. At the end of five years, the excavator will be sold for $33000. Assuming that the contractor's marginal tax rate is 34% per year, determine the annual after-tax cash flow. Please use MARR=0% for this question. Net Present Worth (MARR)=$ Net Annual Worth (MARR)=$ IRR= % Year 0 1 2 3 4 5 Cash flow $ $ $ $ $ $

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 14P
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A highway contractor is considering buying a new trench excavator that costs $130000 and can dig a 1-metre-wide trench at the rate of 5 metres per hour. With the machine adequately maintained, its production rate will remain constant for the first 1200 hours of operation and then decrease by 0.5 metres per hour each year. The excavator is expected to dig 2 kilometres each year. Maintenance and operating costs will be $15 per hour. The excavator has a CCA rate of 30%. At the end of five years, the excavator will be sold for $33000. Assuming that the contractor's marginal tax rate is 34% per year, determine the annual after-tax cash flow. Please use MARR=0% for this question. Net Present Worth (MARR)=$ Net Annual Worth (MARR)=$ IRR= % Year 0 1 2 3 4 5 Cash flow $ $ $ $ $ $
Transcribed Image Text:A highway contractor is considering buying a new trench excavator that costs $130000 and can dig a 1-metre-wide trench at the rate of 5 metres per hour. With the machine adequately maintained, its production rate will remain constant for the first 1200 hours of operation and then decrease by 0.5 metres per hour each year. The excavator is expected to dig 2 kilometres each year. Maintenance and operating costs will be $15 per hour. The excavator has a CCA rate of 30%. At the end of five years, the excavator will be sold for $33000. Assuming that the contractor's marginal tax rate is 34% per year, determine the annual after-tax cash flow. Please use MARR=0% for this question. Net Present Worth (MARR)=$ Net Annual Worth (MARR)=$ IRR= % Year 0 1 2 3 4 5 Cash flow $ $ $ $ $ $
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