A construction company is considering the proposed acquisition of a newearthmover. The purchase price is $100,000, and an additional $25,000 is required to modify the equipment for special use by the company.111c equipment falls into the MACRS five-year classification (tax life). and it \\ill be sold after five years. (project life) for $50,000. The purchase of the earthmover will have no effect on revenues.but it is expected 10 save the firm $60,000 per year in before-tax operatingcosts-mainly labor. The firm's marginal tax rate is 40%. Assume that the initial investment is lo be finance by a bank loan at an interest rate of 10% payable annually. Determine after-tax cash flow and the worth of investment for this project if the firm's M AR R is known to be 12%
A construction company is considering the proposed acquisition of a new
earthmover. The purchase price is $100,000, and an additional $25,000 is required to modify the equipment for special use by the company.111c equipment falls into the MACRS five-year classification (tax life). and it \\ill be sold after five years. (project life) for $50,000. The purchase of the earthmover will have no effect on revenues.
but it is expected 10 save the firm $60,000 per year in before-tax operating
costs-mainly labor. The firm's marginal tax rate is 40%. Assume that the initial investment is lo be finance by a bank loan at an interest rate of 10% payable annually. Determine after-tax cash flow and the worth of investment for this project if the firm's M AR R is known to be 12%
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