Question
In: Finance
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is...
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is projected that the acquisition of this equipment will increase revenue by $10,000 per year. Operating costs for the machine will average $2,600 per year. The machine will be depreciated using the MACRS method, with a recovery period of 7 years. The company uses an after-tax MARR rate of 10% and has an effective tax rate of 30%.
2. Now, suppose that the duration of the project is six years and that an estimate of the value of the equipment cannot be obtained from the marketplace.
2.2. Find the before-tax PW, IRR and discounted payback period (before-tax MARR = 10%). Can the acquisition be economically justified? Why or why not?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is...
A manufacturer of fabricated metal products has acquired a new
plasma table for $37,000. It is projected that the acquisition of
this equipment will increase revenue by $10,000 per year. Operating
costs for the machine will average $2,600 per year. The machine
will be depreciated using the MACRS method, with a recovery period
of 7 years. The company uses an after-tax MARR rate of 10% and has
an effective tax rate of 30%.
2. Now, suppose that the duration of...
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is...
A manufacturer of fabricated metal products has acquired a new
plasma table for $37,000. It is projected that the acquisition of
this equipment will increase revenue by $10,000 per year. Operating
costs for the machine will average $2,600 per year. The machine
will be depreciated using the MACRS method, with a recovery period
of 7 years. The company uses an after-tax MARR rate of 10% and has
an effective tax rate of 30%.
2. Now, suppose that the duration of...
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is...
A manufacturer of fabricated metal products has acquired a new
plasma table for $37,000. It is projected that the acquisition of
this equipment will increase revenue by $10,000 per year. Operating
costs for the machine will average $2,600 per year. The machine
will be depreciated using the MACRS method, with a recovery period
of 7 years. The company uses an after-tax MARR rate of 10% and has
an effective tax rate of 30%.
What conclusion can be drawn by comparing...
A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is...
A manufacturer of fabricated metal products has acquired a new
plasma table for $37,000. It is projected that the acquisition of
this equipment will increase revenue by $10,000 per year. Operating
costs for the machine will average $2,600 per year. The machine
will be depreciated using the MACRS method, with a recovery period
of 7 years. The company uses an after-tax MARR rate of 10% and has
an effective tax rate of 30%.
2. Now, suppose that the duration of...
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A division of Raytheon owns a 5-year-old turret lathe used to manufacture fabricated metal products that...
A division of Raytheon owns a 5-year-old turret lathe used to
manufacture fabricated metal products that was purchased for
$96,000 and now has a financial reporting (non-tax) book value of
$24,000. It has been depreciated for tax purposes as MACRS-GDS
7-year property. It has a current market value of $18,000. The
expected decline in market value is $3,000 per year from this point
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