10.16 An asset in the five-year MACRS property class costs $150,000 and has a zero estimated salvage value after six years of use. The asset will generate annual revenues of $320,000 and will require $80,000 in annual labor and $50,000 in annual material expenses. There are no other revenues and expenses. Assume a tax rate of 25%. a. Compute the after-tax cash flows over the project life. b. Compute the NPW at MARR=12%. Is the investment acceptable?
10.16 An asset in the five-year MACRS property class costs $150,000 and has a zero estimated salvage value after six years of use. The asset will generate annual revenues of $320,000 and will require $80,000 in annual labor and $50,000 in annual material expenses. There are no other revenues and expenses. Assume a tax rate of 25%. a. Compute the after-tax cash flows over the project life. b. Compute the NPW at MARR=12%. Is the investment acceptable?
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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