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It is desired to compare the after-tax economics of two mutually exclusive alternatives with the following...

It is desired to compare the after-tax economics of two mutually exclusive alternatives with the following before-tax data for a study period (planning horizon) of 4 years:

   Semiautomatic Machine                   Automatic Machine

First cost                                            $100,000                                       $150,000

Useful life                                              4 years                                             5 years

Market value at end of useful life             $0                                                     $0

Annual before-tax cash disbursements $50,000                                            $15,000

Annual cash revenues                           $110,000                                          $90,000

MARR (after tax) = 15% p.a.

Study Period = 4 years

Both alternatives are to be depreciated using straight-line depreciation over the life of the machine. It is assumed that the automatic machine can be sold at the book value after 4 years,

I.e. 20% of the first cost of the machine after 4 years of depreciation.

A 40% tax rate is assumed.

Which alternative is preferred on the basis of net present value?

Can i have a detailed answer, please! And also not in excel.

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