A manufacturing firm is making auto parts. The machine operators do the packaging and fill the shipping boxes. Each box should contain 60 parts, but the operatorsfill the boxes by eye, so the average parts per box is 63. Each auto part costs $1. The company realizes that they are wasting parts by overfilling the boxes and decidesto automate the packaging which reduces the average parts per box to 60.The equipment would cost $65,000 and SL depreciation with 7-year depreciable life and $10,000 salvage value would be used. Cost of maintaining the equipment is$8,000 annually. The firm manufactures 800K auto parts each year. The combined federal and state incremental tax rate is 30%. Assume a 7-year analysis period andMARR of 10%.1. What is the after-tax present worth?2. What is the after-tax payback period? (No-return payback period)

Present worth is present value of benefits after deductions of initial cost and expenses.

Answered: acturing firm is making auto parts. The…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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