Question
In: Economics
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to...
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to be useful for 10 years. At the end of the 10th year, the firm intends to sell the machine for an estimated price of $52,036. In addition, the yearly benefits are expected to be $201,952 while the annual maintenance costs are predicted to be $51,300. The company uses a 9% interest rate for this project and it is currently being taxed at a flat tax rate of 21%. This time assume that Man-U-Facturing Inc. uses straight-line depreciation. What the is the after-tax internal rate of return?
Solutions
Expert Solution
Solution :- Depreciation per year = ( Purchase Price - Salvage Value ) / Life
= ( $850,000 - $52,036 ) / 10 = $79,796.40
Net Annual Benefit = $201,952 - $51,300 = $150,652
After tax Internal Rate of Return = 10.12%
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Rahul Sunny answered 1 year agoRelated Solutions
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to...
Man-U-Facturing Inc. will buy a machine that has a cost of
$850,000 and is expected to be useful for 10 years. At the end of
the 10th year, the firm intends to sell the machine for an
estimated price of $52,036. In addition, the yearly benefits are
expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
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the 10th year, the firm intends to sell the machine for an
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expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
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$850,000 and is expected to be useful for 10 years. At the end of
the 10th year, the firm intends to sell the machine for an
estimated price of $52,036. In addition, the yearly benefits are
expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to...
Man-U-Facturing Inc. will buy a machine that has a cost of
$850,000 and is expected to be useful for 10 years. At the end of
the 10th year, the firm intends to sell the machine for an
estimated price of $52,036. In addition, the yearly benefits are
expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to...
Man-U-Facturing Inc. will buy a machine that has a cost of
$850,000 and is expected to be useful for 10 years. At the end of
the 10th year, the firm intends to sell the machine for an
estimated price of $52,036. In addition, the yearly benefits are
expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to...
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$850,000 and is expected to be useful for 10 years. At the end of
the 10th year, the firm intends to sell the machine for an
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expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
this project and it is currently being taxed at a flat...
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the 10th year, the firm intends to sell the machine for an
estimated price of $52,036. In addition, the yearly benefits are
expected to be $201,952 while the annual maintenance costs are
predicted to be $51,300. The company uses a 9% interest rate for
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