Find the year-by-year after-tax net cash flow for the project at a 40% marginal tax rate based on the net income and determine the after tax net present worth of the project at the company’s MARR of 15%.
A computerized machining center has been proposed for a small tool manufacturing company. If the new system, which costs $125,000, is installed, it will generate annual revenues of $100,000 and will require $20,000 in annual labor, $12,000 in annual material expenses, and another $8,000 in annual overhead (power and utility) expenses. A loan of $100,000 is borrowed from the bank for installation of the machining center which is repaid by equal annual repayments in 5 years at an interest rate of 8% compounded quarterly. Note that there is a working-capital requirement of $23,331 in year 0 and full recovery of the
The machining center would be classified as a seven-year MACRS property. If the asset is held for eight years, we can
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