AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment equals=$356,000; market value at end of year six equals=$127,000; annual revenus = $127,000; annual expenses = $10,000; equipment life equals=6 years; effective income tax rate equals=22%; and after-tax MARRequals=12% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment's ATCFs.

AMT, Inc., is considering the purchase of a digital camera for maintenance of design specifications by feeding digital pictures directly into an engineering workstation where computer-aided design files can be superimposed over the digital pictures. Differences between the two images can be noted, and corrections, as appropriate, can then be made by design engineers. a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment equals=$356,000; market value at end of year six equals=$127,000; annual revenus = $127,000; annual expenses = $10,000; equipment life equals=6 years; effective income tax rate equals=22%; and after-tax MARRequals=12% per year. MACRS depreciation will be used with a five-year recovery period. b. Compute the PW of the equipment's ATCFs.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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Similar questions

A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firms cost of capital is 12 percent. Compute the IRR and the NPV. Should the firm accept or reject the project?
AMI, Inc., IS Considering the purchase ot a digital camera tor maintenance of design specitfications by teeding digital pictures directiy into an engineering workstation where computer-aided design files can be superimposed over the digital pIctures. Dittferences between the two images canbe noted, and corrections, as appropriate, can then be made by design engineers a. You have been asked by management to determine the PW of the EVA of this equipment, assuming the following estimates: capital investment = $326,000; market value at end of year six=$122,000, annual revenues = $122,000; annual expenses = $8,000; equipment life = 6 years;effective income tax rate = 25%, and after-tax MARR=8% per year. MACRS depreciation will be used with a five-year recovery period.b. Compute the PW of the equipment's ATCFs.
Peachtree Construction Company, a highway contractor, is considering the purchase of a new trench excavator that costs 300000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The contractor gets paid according to the usage of the equipment, 100 per hour. The expected average annual usage is 500 hours, and maintenance and operating costs will be 10 per hour. The contractor will depreciate the equipment by using a five-year MACRS, units-of-production method. At the end of five years, the excavator will be sold for 100000. Assuming the contractor’s marginal tax rate is 25% per year, determine the annual after-tax cash flow. In excel.
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A fixed capital investment of ₱87,000,000 is required for a proposed manufacturing plant and an estimated working capital of ₱3,000,000. Annual depreciation is estimated to be 11% of the fixed capital investment. Annual revenue is ₱2778,000.What is the payback period (in years) of the proposed manufacturing plant?
Liberty Airways is considering an investment of$800,000 in ticket purchasing kiosks at selected airports.The kiosks (hardware and software) have an expectedlife of four years. Extra ticket sales are expected to be60,000 per year at a discount price of $40 per ticket.Fixed costs, excluding depreciation of the equipment,are $400,000 per year, and variable costs are $24 perticket. The kiosks will be depreciated over four years,using the SL method with a zero salvage value. Theonetime commitment of working capital is expected tobe 1/12 of annual sales dollars. The after-tax MARR is15% per year, and the company pays income tax at therate of 34%. What’s the after-tax PW of this proposedinvestment? Should the investment be made?
An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. ROR method2. payout method
A start-up biotech company is considering making an investment of $100,000 in a new filtration system. The associated estimates are summarized below: Annual receipts $75,000 Annual expenses $45,000 Useful life 8 years Terminal book value (EOY 8) $20,000 Terminal market value $0 Straight-line depreciation will be used, and the effective income tax rate is 20%. The after-tax MARR is 15% per year. Determine whether this investment is an attractive option for the company.