Engineering Economy (17th Edition)
17th Edition
ISBN: 9780134870069
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Question
Chapter 13, Problem 8P
a.
To determine
The better alternative by comparing after tax equivalent with income tax rate of 25%.
b.
To determine
The better alternative by comparing before tax equivalent annual cost by using the information on annual cost of operations without a truck.
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BlastCo Analytics needs to purchase a new metal shaper. BlastCo’s after-tax MARR is 12% and the corporate tax rate is 54%. A metal shaper is a CCA Class 8 asset. The remaining data are contained in the table below.
Model
First Cost
Economic Life (Years)
Annual Net Savings
Salvage Value
Flex
$100,000
5
$50,000
$20,000
Blender
$120,000
5
$55,000
$25,000
Flextastic
$200,000
5
$75,000
$100,000
(a) Using the annual worth method, which model should BlastCo buy?(b) What is the approximate after tax IRR of each model?(c) What is the exact after tax IRR of each model?
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
BlastCo Analytics needs to purchase a new metal shaper. BlastCo's after tax MARR is 12% and the
corporate tax rate is 54%. A metal shaper is a CCA Class 8 asset. The remaining data are contained in
the table below.
Model
Flex
First Cost
Economic Life Annual Net
(Years)
Savings
$100,000 5
Blender $120,000 5
Flextastic $200,000 5
$50,000
$55,000
$75,000
Salvage
Value
$20,000
$25,000
$100,000
A new municipal refuse collection vehicle can be purchased for $84,000. Itsexpected useful life is six years, at which time the market value and book value will be zero. Before-tax cash flow (BTCF) will be +$18,000 per year over the six-year life of the vehicle. Solve, a. Use straight-line depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment. b. What is the after-tax internal rate of return? c. Is this vehicle a sound investment? Explain your answer.
Chapter 13 Solutions
Engineering Economy (17th Edition)
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- BlastCo Analytics needs to purchase a new metal shaper. BlastCo's after-tax MARR is 12% and the corporate tax rate is 54%. A metal shaper is a CCA Class 8 asset. The remaining data are contained in the table below. Model Flex First Cost Economic Life (Years) Annual Net Salvage Savings Value $50,000 $100,000 5 $20,000 Blender $120,000 5 $55,000 $25,000 Flextastic $200,000 5 $75,000 $100,000 (a) Using the annual worth method, which model should BlastCo buy? (b) What is the approximate after tax IRR of each model? (c) What is the exact after tax IRR of each model?arrow_forwardA contractor is considering the purchase of a set of machine tools at a cost of $50,000. The purchase is expected to generate profits of $19,000 (revenues less expenses) per year in each of the next 4 years Additional profits will be taxed at a rate of 40%. The asset is depreciated by straight-line method with zero salvage value. The contractor's real after-tax MARR is 10% (25%) 1). What is the PW of this investment? Should the contractor purchase the machine tools? 2). What is the PW of this investment if the general inflation is 3% in the 4 year period? Should the contractor purchase the machine tools?arrow_forwardYour business buys a delivery van for $28,000. You figure the van will be useful for 5 years and have a value of $5,000 at the end of the 5-year period. What is the (a) basis, (b) useful life, (c) salvage value, (d) depreciable basis, (e) accumulated depreciation at the end of year 2 if you take $4,600 depreciation each year, and (f) the book value at the end of year 2?arrow_forward
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