1) Because of tighter safety regulations, an improved air filtration system must be installed at a plant that produces ahighly corrosive chemical compound. The capital investment in the system is $260,000 in present day dollars. Thesystem has a useful life of 10 years and is in the MACRS (GDS) five-year property class. It is expected that the MarketValue of the system at the end of its 10-year life will be $50,000 in present-day dollars. Annual expenses, estimated inpresent-day dollars, are expected to be $6,000 per year, not including an annual property tax of 4% of the investmentcost (does not inflate). Assume that the plant has a remaining life of 20 years and that replacement costs, annualexpenses, and Market Value increase at 6% per year. If the effective income tax rate is 40%, setup a table to determinethe ATCF for the system over a 20-year period. The after-tax market rate of return desired on investment capital is 12%per year (im). What is the PW of costs of this system after income taxes have been taken into account? Develop the real-dollar ATCF. (Assume that the annual general price inflation rate is 4.5% over the 20-year period.)

explanation:1. Calculate Present Value (PV) Factor:• Use the formula for present value factor: PV…

Answered: 1) Because of tighter safety…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The investment of design 2 is supposed to be $140600. The MARR to be used in the problem is 20%.
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