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?
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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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
(c) What is the exact after tax IRR of each model?
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