FAME Industries is a small business expanding its machining operations and plans to purchase 10 CNC machines for a total of $1,500,000; this is considered MACRS 5-year property. The business estimates that these machines will generate an additional revenue of $230,000 per year; they plan to keep the machines for the next 8 years. At the end of 8 years, the CNC machines would have a salvage value of $150,000. The tax rate is 26%, the CNC machines are eligible for a Section 179 deduction, and FAME Industries uses an after-tax MARR of 8%. Compute the PW and determine whether FAME Industries should invest in the CNC machines. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±20. Should FAME Industries invest in the CNC machines?
FAME Industries is a small business expanding its machining operations and plans to purchase 10 CNC machines for a total of $1,500,000; this is considered MACRS 5-year property. The business estimates that these machines will generate an additional revenue of $230,000 per year; they plan to keep the machines for the next 8 years. At the end of 8 years, the CNC machines would have a salvage value of $150,000. The tax rate is 26%, the CNC machines are eligible for a Section 179 deduction, and FAME Industries uses an after-tax MARR of 8%. Compute the PW and determine whether FAME Industries should invest in the CNC machines. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±20. Should FAME Industries invest in the CNC machines?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...
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