natives below. The after-tax MARR is 10% per year, MACRS depreciation applies, andT.= 42%. The (GI – OE) estimate is made for the first three years; it is zero in year 4 when each asset is sold. Alternative First Cost. $ -8,000 -13,000 Salvage value, year 4, $ GI – OE, $ per year 3,500 5,000 Recovery period, years

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Perform a PW-based evaluation of the two alternatives below.
The after-tax MARR is 10% per year, MACRS depreciation
applies, and T.= 42%. The (GI – OE) estimate is made for the
first three years; it is zero in year 4 when each asset is sold.
%3D
Alternative
First Cost. $
-8,000
-13,000
Salvage value, year 4, $
GI – OE, $ per year
3,500
5,000
Recovery period, years
Transcribed Image Text:Perform a PW-based evaluation of the two alternatives below. The after-tax MARR is 10% per year, MACRS depreciation applies, and T.= 42%. The (GI – OE) estimate is made for the first three years; it is zero in year 4 when each asset is sold. %3D Alternative First Cost. $ -8,000 -13,000 Salvage value, year 4, $ GI – OE, $ per year 3,500 5,000 Recovery period, years
Calculation of CFAT
Gross
Income
Operating
Expense
OE
Investment
and Salvage
P and S
Taxable
Income
Year
CFBT
Depreciatlon
Taxes
CFAT
GI
TI
(1)
(2)
(3)
(4) =
(1) ► (2) ► (3)
(6) =
(7) = (8) =
T. (6)
(5)
%3D
%3D
(1) (2)- (5)
(4)-(7)
Transcribed Image Text:Calculation of CFAT Gross Income Operating Expense OE Investment and Salvage P and S Taxable Income Year CFBT Depreciatlon Taxes CFAT GI TI (1) (2) (3) (4) = (1) ► (2) ► (3) (6) = (7) = (8) = T. (6) (5) %3D %3D (1) (2)- (5) (4)-(7)
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