Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 9, Problem 47P
To determine
Calculate the economic
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Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected
to reduce net annual operating expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end of the 10th year.
Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%.
State income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop
the BTCFS and ATCFS and compute for the respective PWs at EOY O using an MARR of 12%.
Before-Tax Cash
Flow ($)
Cash Flow for Income After-Tax Cash Flow
($)
EOY
Depreciation ($)
Taxable Income ($)
Taxes ($)
[1]
1
[2]
[3]
3
[4]
[5]
4
15
[6]
8
[7]
9
10
[8]
PW(0) using
MARR
[9]
[10]
Based on Before-Tax Analysis, is this machinery worth investing in? ("YES"/"NO")
[11]
Based on After-Tax Analysis, is this machinery worth investing in? ("YES"/"NO"}
[12]
Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce
net annual operating expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end of the 10th year. Assume that the firm is in
the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income taxes are deductible
from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the
respective PWs at EOY O using an MARR of 12%.
Cash Flow for Income
Taxes ($)
Before-Tax Cash Flow
ΕΟΥ
Depreciation ($)
Taxable Income ($)
After-Tax Cash Flow ($)
($)
[1]
1
[2]
2
[3]
[4]
4
[5]
[6]
[7]
9
[8]
10
[10]
PW(0) using
MARR
[9]
[11]
Based on Before-Tax Analysis, is this machinery worth investing in? ("YES"/"NO"}
[12]
Based on After-Tax Analysis, is this machinery worth investing in? ["YES"/NO")
Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operating expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end of the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFs and ATCFs and compute for the respective PWs at EOY 0 using an MARR of 12%.
Chapter 9 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10P
Ch. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Prob. 26PCh. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33PCh. 9 - Prob. 34PCh. 9 - Prob. 35PCh. 9 - Prob. 36PCh. 9 - Prob. 37PCh. 9 - Prob. 38PCh. 9 - Prob. 39PCh. 9 - Prob. 40PCh. 9 - Prob. 41PCh. 9 - Prob. 42PCh. 9 - Prob. 43PCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - Prob. 48PCh. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52PCh. 9 - Prob. 53PCh. 9 - Prob. 1STCh. 9 - Prob. 2STCh. 9 - Prob. 3STCh. 9 - Prob. 4ST
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