2) A logistics firm is deciding between two models of semi-trailer trucks to add to its fleet. The manager ofthe company has prepared the following information for the economic evaluation of this decision. The newtrucks are to be used for seven years and then sold for the estimated salvage value. The before-tax minimumattractive rate of return of the company is 16.39% per year and the effective tax rate is 39%. Select a machineon the basis of after-tax annual worth analysis using the MACRS general depreciation system.AlternativeInitial InvestmentNet Annual BenefitSalvage valueUseful Life (years)P1$245,000$155,000$44,50010P2$230,000$140,000$37,50010

Alternative 1 Year cash flows Depreciation Profit after tax Profit after tax +…

even years and then sold for the estimated salvage value. the company is 16.39% per year and the effective tax rate nual worth analysis using the MACRS general deprecial Alternative Initial Investment Net Annual Benefit Salvage value Useful Life (years) P1 $245,000 $155,000 $44,500 10 P2 $230,000 $140,000 $37,500 10

even years and then sold for the estimated salvage value. the company is 16.39% per year and the effective tax rate nual worth analysis using the MACRS general deprecial Alternative Initial Investment Net Annual Benefit Salvage value Useful Life (years) P1 $245,000 $155,000 $44,500 10 P2 $230,000 $140,000 $37,500 10

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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